The Americas Blog

El Blog de las Americas

The Americas Blog seeks to present a more accurate perspective on economic and political developments in the Western Hemisphere than is often presented in the United States. It will provide information that is often ignored, buried, and sometimes misreported in the major U.S. media.

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“Examining the Gendered and Other Impacts of IMF Surcharges” explored the extent to which the IMF's surcharge policy is consistent with its stated commitment to gender equality and a greener, smarter, and fairer COVID-19 recovery.
“Examining the Gendered and Other Impacts of IMF Surcharges” explored the extent to which the IMF's surcharge policy is consistent with its stated commitment to gender equality and a greener, smarter, and fairer COVID-19 recovery.
The IMF’s newly established Resilience and Sustainability Trust sets the reserve asset status standard for SDR investments and creates a roadmap for regional development banks to onlend rich countries’ SDRs to developing countries in need of financing for sustainable development, and climate financing. The IMF has published the details of the Resilience and Sustainability Trust […]
The IMF’s newly established Resilience and Sustainability Trust sets the reserve asset status standard for SDR investments and creates a roadmap for regional development banks to onlend rich countries’ SDRs to developing countries in need of financing for sustainable development, and climate financing. The IMF has published the details of the Resilience and Sustainability Trust […]
Around the world, everyone from economic justice organizations, to Nobel Prize-winning economists, to members of Congress are calling for the elimination of a once little-known practice of the International Monetary Fund (IMF): the imposition of punitive, hidden fees on countries with high levels of outstanding IMF debt. In a report published last year, my coauthors […]
Around the world, everyone from economic justice organizations, to Nobel Prize-winning economists, to members of Congress are calling for the elimination of a once little-known practice of the International Monetary Fund (IMF): the imposition of punitive, hidden fees on countries with high levels of outstanding IMF debt. In a report published last year, my coauthors […]

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In August of last year, the International Monetary Fund (IMF) responded to the COVID-19 pandemic and the resulting global economic crisis with a new allocation of $650 billion worth of Special Drawing Rights (SDRS). These assets serve to supplement the foreign reserve holdings of countries, thereby helping stabilize their finances and avoid balance of payments crises, which can cause severe economic damage and increases in poverty and mortality. SDRs can also be exchanged for hard currency by countries in need, in order to invest in economic recovery plans and import essential goods, including vaccines and medical equipment. 

Last year’s allocation came at zero cost to the United States, and has proved invaluable for developing countries around the world. Already, 99 countries — including Ukraine — have made use of their allocation to stabilize their currencies, shore up reserves, pay off debts, or finance health care and other urgent needs. 

But for many, last year’s allocation was not nearly enough. On top of the continued fallout from the pandemic, the repercussions of the Russian invasion of Ukraine will reverberate around the world, with rising food and fuel prices hitting developing countries hardest. The need to get more SDRs into the hands of developing countries — both through a new allocation and through the transfer of existing SDRs from wealthy countries to poorer countries — is as urgent as ever. But misinformation, and one falsehood in particular, keeps coming up.

The claim: 

The United States should oppose a new allocation, or the recycling of SDRs, because SDRs would be used by authoritarian governments, competitors, and countries under US sanctions, like Russia.

The reality: 

Sanctioned countries like Russia have not, and almost certainly, will not be able to use their SDRs.

  • Afghanistan, Belarus, Iran, Myanmar, Russia, Sudan, Syria, and Venezuela, all countries facing broad financial sanctions, have not used any of their SDRs since the August allocation. Regardless of one’s position on the use and efficacy of economic sanctions, claims that further SDR distribution would meaningfully benefit these countries have proven false.[1]

  • Countries whose central banks are sanctioned, including Iran and Russia, have effectively not been able to use their new SDRs, because turning SDRs into hard currency requires another party to exchange with. Sanctions, and the threat of secondary sanctions, have deterred other countries, including China, from playing that role. In theory, the IMF can obligate wealthy countries to provide cash in exchange for SDRs, but as an article published by the Center for Global Development explains, the US and its European allies can easily ignore an instruction of this sort without negative consequences.

  • Iran, an IMF member country with an IMF-recognized government, whose central bank is currently not even sanctioned by the European Union, has not been able to access or use its new SDRs, because other banks are unwilling to transfer currency to the Central Bank of Iran and face potential secondary sanctions from the US. 

  • Even the Saudi-backed, IMF-recognized branch of the Yemen Central Bank, which is not under US sanctions, but which is a warring party, has not been able to find a trading partner for its SDRs, even among its close allies. 

  • Some countries, such as Afghanistan and Venezuela, have not been able to use their new SDRs because, in addition to being sanctioned, the IMF does not recognize their governments. When the IMF managing director requests the suspension of recognition of a country’s government, the Executive Board requires the United States’ assent in order to recognize it again.

  • Cuba and North Korea are not IMF members, and therefore did not receive any share of the SDR issuance.

China — much like the United States — does not need its SDRs, and is unlikely to ever use them.

  • China has over $3 trillion in foreign reserves, and the renminbi is a major, globally-traded currency included in the basket of currencies used to determine the value of the SDR. China has the resources and monetary policy tools to maintain a stable financial environment. It has not used its 2021 SDR allocation and it is difficult to imagine a situation in which it would do so, under IMF rules. 

  • In fact, rather than using its SDRs, China is pledging a quarter of its SDR allocation to Africa, and playing the role of a provider of liquidity by buying SDRs held by poorer countries. The Biden administration also planned on transferring many of its SDRs to countries in need, but was blocked from doing so by Republicans in Congress.

While some have misleadingly cited Russia’s invasion of Ukraine as a reason to oppose SDRs, the war in Ukraine is actually all the more reason to support the allocation and recycling of SDRs.

  • The 2021 SDR allocation was of significant help to Ukraine, which was under serious financial strain, even prior to the invasion. Ukraine has already used the entirety of its 2021 allocation.

  • A new allocation, or the recycling of SDRs, would aid Ukraine even further. Ukraine has already used virtually all of the SDRs it acquired from last year’s allocation and recently  requested access to more SDRs from the IMF in order to stabilize its finances. 

  • The IMF predicts that the Russian invasion of Ukraine, and the restrictions subsequently placed on the Russian economy, will have a “severe impact” on the global economy. Fuel and food prices, the latter a key predictor of social unrest and political instability, are rising. This, on top of the already slow pandemic recovery, makes it all the more urgent to get SDRs into the hands of vulnerable countries. 

  • While directing aid to specific countries would be welcome, a new allocation of SDRs and the recycling of SDRs held by the United States are some of the fastest and most direct tools available to help all developing countries facing this crisis — and a new allocation would come at no cost to the United States. 

See here for more fact-checks of common arguments used by opponents of SDRs.


[1] Though Myanmar and Afghanistan have not accessed or used their SDRs, the IMF has automatically debited their accounts to cover minor regular charges.

In August of last year, the International Monetary Fund (IMF) responded to the COVID-19 pandemic and the resulting global economic crisis with a new allocation of $650 billion worth of Special Drawing Rights (SDRS). These assets serve to supplement the foreign reserve holdings of countries, thereby helping stabilize their finances and avoid balance of payments crises, which can cause severe economic damage and increases in poverty and mortality. SDRs can also be exchanged for hard currency by countries in need, in order to invest in economic recovery plans and import essential goods, including vaccines and medical equipment. 

Last year’s allocation came at zero cost to the United States, and has proved invaluable for developing countries around the world. Already, 99 countries — including Ukraine — have made use of their allocation to stabilize their currencies, shore up reserves, pay off debts, or finance health care and other urgent needs. 

But for many, last year’s allocation was not nearly enough. On top of the continued fallout from the pandemic, the repercussions of the Russian invasion of Ukraine will reverberate around the world, with rising food and fuel prices hitting developing countries hardest. The need to get more SDRs into the hands of developing countries — both through a new allocation and through the transfer of existing SDRs from wealthy countries to poorer countries — is as urgent as ever. But misinformation, and one falsehood in particular, keeps coming up.

The claim: 

The United States should oppose a new allocation, or the recycling of SDRs, because SDRs would be used by authoritarian governments, competitors, and countries under US sanctions, like Russia.

The reality: 

Sanctioned countries like Russia have not, and almost certainly, will not be able to use their SDRs.

  • Afghanistan, Belarus, Iran, Myanmar, Russia, Sudan, Syria, and Venezuela, all countries facing broad financial sanctions, have not used any of their SDRs since the August allocation. Regardless of one’s position on the use and efficacy of economic sanctions, claims that further SDR distribution would meaningfully benefit these countries have proven false.[1]

  • Countries whose central banks are sanctioned, including Iran and Russia, have effectively not been able to use their new SDRs, because turning SDRs into hard currency requires another party to exchange with. Sanctions, and the threat of secondary sanctions, have deterred other countries, including China, from playing that role. In theory, the IMF can obligate wealthy countries to provide cash in exchange for SDRs, but as an article published by the Center for Global Development explains, the US and its European allies can easily ignore an instruction of this sort without negative consequences.

  • Iran, an IMF member country with an IMF-recognized government, whose central bank is currently not even sanctioned by the European Union, has not been able to access or use its new SDRs, because other banks are unwilling to transfer currency to the Central Bank of Iran and face potential secondary sanctions from the US. 

  • Even the Saudi-backed, IMF-recognized branch of the Yemen Central Bank, which is not under US sanctions, but which is a warring party, has not been able to find a trading partner for its SDRs, even among its close allies. 

  • Some countries, such as Afghanistan and Venezuela, have not been able to use their new SDRs because, in addition to being sanctioned, the IMF does not recognize their governments. When the IMF managing director requests the suspension of recognition of a country’s government, the Executive Board requires the United States’ assent in order to recognize it again.

  • Cuba and North Korea are not IMF members, and therefore did not receive any share of the SDR issuance.

China — much like the United States — does not need its SDRs, and is unlikely to ever use them.

  • China has over $3 trillion in foreign reserves, and the renminbi is a major, globally-traded currency included in the basket of currencies used to determine the value of the SDR. China has the resources and monetary policy tools to maintain a stable financial environment. It has not used its 2021 SDR allocation and it is difficult to imagine a situation in which it would do so, under IMF rules. 

  • In fact, rather than using its SDRs, China is pledging a quarter of its SDR allocation to Africa, and playing the role of a provider of liquidity by buying SDRs held by poorer countries. The Biden administration also planned on transferring many of its SDRs to countries in need, but was blocked from doing so by Republicans in Congress.

While some have misleadingly cited Russia’s invasion of Ukraine as a reason to oppose SDRs, the war in Ukraine is actually all the more reason to support the allocation and recycling of SDRs.

  • The 2021 SDR allocation was of significant help to Ukraine, which was under serious financial strain, even prior to the invasion. Ukraine has already used the entirety of its 2021 allocation.

  • A new allocation, or the recycling of SDRs, would aid Ukraine even further. Ukraine has already used virtually all of the SDRs it acquired from last year’s allocation and recently  requested access to more SDRs from the IMF in order to stabilize its finances. 

  • The IMF predicts that the Russian invasion of Ukraine, and the restrictions subsequently placed on the Russian economy, will have a “severe impact” on the global economy. Fuel and food prices, the latter a key predictor of social unrest and political instability, are rising. This, on top of the already slow pandemic recovery, makes it all the more urgent to get SDRs into the hands of vulnerable countries. 

  • While directing aid to specific countries would be welcome, a new allocation of SDRs and the recycling of SDRs held by the United States are some of the fastest and most direct tools available to help all developing countries facing this crisis — and a new allocation would come at no cost to the United States. 

See here for more fact-checks of common arguments used by opponents of SDRs.


[1] Though Myanmar and Afghanistan have not accessed or used their SDRs, the IMF has automatically debited their accounts to cover minor regular charges.

The enduring legacy of Venezuela’s short-lived 2002 coup d’etat, and the subsequent countercoup, for US-Latin American relations

On April 11, 2002, Venezuela’s democratically elected government, headed by Hugo Chávez Frías, was ousted in a military coup d’etat. Then, dramatically, two days later, the coup was overturned by a mass mobilization of Venezuelans. They demanded the restoration of democracy and the return of a government that appeared to be making good on its commitment to redistribute Venezuela’s oil wealth to benefit the country’s most marginalized sectors. These events led to lasting ramifications not just for Venezuela, but for Latin America and the Caribbean as a whole, paving the way for a “pink tide” of progressive movements that took power democratically throughout the region. In many cases, similar power struggles ensued, pitting left-leaning governments supporting economic and social gains for the poor, the working class, and marginalized communities, against powerful factions of society seeking, generally, to maintain a status quo that has served to benefit mostly a small number of elites and foreign interests while exploiting and repressing the majority population.

The coup itself was not novel, of course, but it was the first Latin American coup in the twenty-first century, and showed that the US government would continue to prioritize its perceived geopolitical interests — and those of multinational corporations — in the region over democracy. The US would go on to support coups, and other sorts of undemocratic political transitions, in Haiti (2004), Honduras (2009), Paraguay (2012), Brazil (2016), and Bolivia (2019) — and would show support for attempted coups in Bolivia (2008), Ecuador (2010), and Venezuela (2019). Elements of the 2002 Venezuela coup playbook would also be repeated in many cases.

Much has since been written about the trajectory the Chávez government took following its survival of the coup, for better and for worse. The experiences of late 2002 and early 2003 (in which many of the same opposition forces continued their attempt to topple the government through a crippling months-long managerial strike that paralyzed the oil industry), and 2004, when Chávez handily survived a recall referendum, demonstrated both that Chávez had nothing to lose by turning farther left (he would proclaim his government’s goal of working toward “socialism for the twenty-first century” in 2005), and that he would need to take firm action if he were to gain control of the Venezuelan economy and be able to carry out his agenda. Chávez sacked PDVSA’s striking managers, which subsequently allowed Venezuela to achieve some of the strongest economic growth in the region for several years after. This was accompanied by impressive poverty reduction and the launching of the many misiones — programs designed to provide low-income Venezuelans with food, health care, education, and other needs.

The “self-proclaimed socialist” President Chávez (as international media loved to call him) that we remember now is really the post-coup Chávez. More than 20 years after he was first elected, it is easy to forget that he originally campaigned on a “third way” platform, calling to mind Tony Blair and Bill Clinton. So what did Chávez do in his first years that so upset his opponents, foreign and domestic, that they overthrew him?

At home, Chávez’s fledgling government embarked on long-overdue land reform. It enacted a new constitution, which consolidated a breaking of the old political order exemplified by the punto fijo pact that had ensured that political power alternated between the nominally social democratic Acción Democrática party and more conservative Christian democrat COPEI party. The traditional parties and factions lost seven elections in just three years.

On the global stage, amid the start of the US’s “Global War on Terror” and George W. Bush’s imperious declaration that “Either you are with us, or you are with the terrorists,” Chávez did not hesitate to harshly condemn the US bombing of Afghanistan and its predictable civilian death toll. Chávez’s government reinvigorated OPEC; its oil diplomacy led to production cuts and a global oil price stabilization. Worse, Chávez sought to renegotiate oil deals with foreign companies that, for years, had supplied US and other companies with cheap oil while providing little revenue to Venezuela itself. He stopped allowing US counternarcotics flights from entering Venezuelan airspace, and ended the US military presence at the Fuerte Tiuna military base. He was skeptical of the US effort to expand NAFTA throughout the hemisphere as the “Free Trade Area of the Americas.” And he conspicuously developed a close relationship with the Cuban government.

The US government was wary of Chávez well before he was elected president. Once he was in office, this began to turn toward open hostility, and in the months before the coup, some observers, such as John Pilger and Conn Hallinan, began to warn that a coup d’etat appeared likely.

Shortly after Chávez’s denunciations of the US war on Afghanistan in late 2001, which he made on TV while holding up photographs of Afghan children killed in US strikes, US military and intelligence agencies met to discuss their Venezuela strategy. Within Venezuela, militant opposition sectors launched a protracted effort to undermine the Chávez government with the goal of toppling it. Senior military officers held press conferences denouncing the “dictatorship” and calling for “civil disobedience” against the country’s recently reelected president. The main trade union federation, the Confederación de Trabajadores de Venezuela (CTV), close to the corrupt, centrist traditional parties that Chávez’s movement had made suddenly irrelevant, joined with the main business association, Fedecámaras, to launch a “general strike” (mostly involving temporary closures of small businesses rather than actual worker strikes).

It was against this backdrop of economic sabotage — and what was reported in the international media as organized labor’s discontent with the Chávez administration — that the coup took place. The catalyzing event that would justify military action against Chávez, and that would explain the quick emergence of a new, unelected government headed by Fedecámaras president Pedro Carmona, was violence connected to a massive opposition march on the presidential palace where marchers faced off against a wall of supporters of the elected government and presidential guard troops who fired tear gas at the opposition demonstrators. Snipers fired on the crowd, mostly killing chavistas, but Venezuela’s opposition-controlled private media blamed Chávez for the killings — accusations soon relayed by international media and the US State Department. This supposed chavista violence became a key part of the pretext for the coup and the narrative that, with the military turning on him, Chávez had decided to resign and flee. In fact, he was taken prisoner and held at military bases (where, Chávez would later claim, he was nearly executed).

Meanwhile, the hastily assembled coup regime abolished Venezuela’s Congress, Supreme Court, and constitution. The coup was greeted with applause in the US, with the International Republic Institute (IRI) — a US government-funded group set up in large part to “do today [what] was done covertly [before] by the CIA” — openly celebrating, and the New York Times praising Chávez’s removal in an editorial. The IMF quickly offered assistance to the “new administration” in prepared remarks just hours after the coup had transpired, suggesting that the Fund’s leaders may have had advance knowledge. (Several members of the US Congress would later ask the Fund to explain this, but never received more than a dismissive response.)

On the ground in Venezuela, some opposition leaders, some of whom are still prominent today, such as Leopoldo López, participated in the coup by helping to persecute and detain officials from the elected government. But what Carmona, López, and other coup supporters didn’t count on was the reaction of the Venezuelan people. Tens of thousands mobilized, coming down from the barrios that line the hillsides above Caracas, and marched on the presidential palace. Chávez retained supporters in the military as well, where he had first organized his revolutionary movement, and the combination of popular pressure and military support for the elected government — along with the revelation that Chávez never had, contrary to Venezuelan media claims, resigned — led to the coup being overturned on April 13.

The golpistas quickly began to back peddle; some who had signed the infamous “Carmona Decree” abolishing the democratic government would deny they had, or would express regret. International supporters of the overthrow of the elected government, including the New York Times, were forced to walk back their statements and admit they had betrayed principles of democratic governance.

Following his return, Chávez was emboldened; even more so after he survived the 2002–2003 oil lockout and took control of PDVSA. He easily triumphed in a 2004 recall referendum (Ricardo Hausmann’s baseless claims of a rigged vote notwithstanding). Within three years, Chávez moved away from his previous “third way” positioning and proclaimed that his government would pursue “socialism for the 21st century.”

Meanwhile, the “Pink Tide” took off, with the elections of Tabaré Vázquez in Uruguay (2004), Evo Morales in Bolivia (2005), Rafael Correa in Ecuador and Manuel Zelaya in Honduras (2006), and Fernando Lugo in Paraguay (2008), in addition to Lula da Silva (Brazil, 2002) and Néstor Kirchner (Argentina, 2003). Regional integration projects soon took off: the Bolivarian Alliance for the Peoples of Our America (ALBA), Petrocaribe and Petrosur (which provided discounted Venezuelan oil to neighboring countries), and UNASUR, among others. The Pink Tide governments also buried the US’s central policy priority for the region at the time: the Free Trade Area of the Americas, which would have expanded NAFTA throughout nearly the entire hemisphere. The Mar del Plata, Argentina summit where the FTAA met its end in 2005 was such a fiasco for the US government that President Bush left early.

Countering Venezuela became the main priority for the US in Latin America and the Caribbean, as a 2006 State Department memo, published by WikiLeaks, made clear. Scores of other cables record how often Venezuela would be a prime topic of discussion between US officials and government and civil society figures in the region, as first Bush and then the Obama administration attempted to stop countries from joining Petrocaribe and other Venezuela-led initiatives, despite privately acknowledging the significant economic benefits for the countries that joined them.

Despite its failure, the Venezuela coup fit a pattern for US-backed regime change efforts. NGOs and activist groups received funding and training from the US government and affiliated groups (notably, the National Endowment for Democracy, NED, of which the IRI is a core grantee). US officials and NED advisors worked hard, although with limited success, to get Venezuela’s opposition to unify and agree on a long-term strategy for throwing out the Chávez government. A similar playbook had been used in places like Serbia, and it would be implemented in subsequent coups in Haiti, Honduras, and Bolivia, with many of the same antagonists (the NED and its core grantees, major media outlets, the business community, and often the Catholic Church hierarchy and the military — except in Haiti, where the military was abolished, but active coup participants included former military).

Denial that a coup had happened after the fact is also a key element of the strategy, one that followed coups in Haiti, Honduras, and Bolivia as well. “It makes perfect sense that in a time when the international community frowns upon coups, that if one were to organize a coup, the first order of business would be to make the coup look like it was something else,” long-time Venezuela analyst Greg Wilpert wrote in an introduction to a 2003 book on the Venezuela coup. Yet internally, the US State Department itself referred to the events of April 2002 in Caracas as a “brief coup” (in 2004 and 2005 cables, for example).

In Haiti in 2004, the prevailing narrative put forward by US officials as well as most of the media was that the democratically elected president, Jean-Bertrand Aristide, had not been overthrown in a coup, but had “resigned” and chosen to flee the country. Never mind that Aristide and Haiti’s first lady were escorted onto a US plane by US Special Forces soldiers; that the Aristides had no idea where the plane was taking them; that Aristide said it had been a “‘new coup d’etat,’ or ‘modern kidnapping’”; and never mind that one of the only other witnesses to these events not in the employ of the US, Aristide’s helicopter pilot, would have the same description of these events as the Aristides. In the wake of the coup, it was easy for the media to overlook the hunting down and persecution of officials and supporters of the ousted government, as the media all but vacated Haiti after the coup, even as thousands were murdered and hundreds imprisoned on bogus charges. As with Venezuela in 2002, the coup government was quickly offered assistance by international finance institutions in Washington, which had previously enacted an aid embargo and had withheld hundreds of millions in loans to Aristide’s government. Some of the same individuals, affiliated with the IRI, even appear to have been involved in both the Venezuelan and Haitian coups.

The 2009 Honduras coup followed a similar playbook, with President Zelaya being forced onto a plane and flown out of the country (after it stopped at a US airbase to refuel) while coup supporters suggested that Zelaya had somehow staged the whole thing and that no coup had taken place. As with Venezuela in 2002, evidence suggests that US officials knew of the coup plans in advance, but there is no indication that they warned the democratically elected government. (It is notable that State Department cables published by WikiLeaks also show that US officials believed there was a credible threat to Evo Morales’s government in Bolivia in 2008, and that he even might be overthrown or killed, but this was not what the US government communicated to the world or to the Bolivian government at the time.)

The following year, Ecuador’s left-wing president, Rafael Correa, came close to being overthrown, and even killed, amid a dramatic confrontation with protesting police officers that ended in a shootout at a hospital where Correa was being treated after he was tear-gassed by the police. Paraguay’s progressive president Fernando Lugo, a former priest, was ousted in a parliamentary coup in 2012 that foreshadowed Brazil president Dilma Rousseff’s fate in 2016. In each of these cases, loud voices proclaimed that these were not “coups,” or coup attempts.

Though it was especially bloody, and racist violence and threats of violence were employed against officials of the elected government to force their departure, there are today still some (even in academia) who loudly deny that the Evo Morales government ended in a coup d’etat. Morales only resigned and left Bolivia after the head of the military asked him to resign, and even then, Morales almost didn’t make it out of Bolivia alive. Violent repression, including two notorious massacres of Indigenous Bolivians, followed the coup. The coup government targeted journalists and activists, and many former government officials were forced to flee the country or take shelter in embassies. Yet anyone who condemned these events as a “coup” was systematically criticized and harassed on social media.

The Bolivian coup, like Venezuela’s, would also effectively be overturned, but only after a year, through elections that were finally organized only after strikes and popular mobilizations demanding that elections be held. Morales’s Movement Toward Socialism (MAS) party won overwhelmingly, making it impossible for the pro-coup right to even make credible claims of election fraud. The elected government is attempting to hold the coup perpetrators accountable for their crimes, but the initial arrests and charging of top officials were promptly condemned by US officials and the likes of Human Rights Watch, who dismissed them as “revenge justice.”

Whether the Bolivian government will be able to successfully hold accountable those who overthrew an elected government, and those who were responsible for the repression and violence that took place under the coup government, is important not just for Bolivia, but for the region. If coup perpetrators rarely face consequences for their crimes, and if the US continues to condemn efforts to hold such individuals to account, there is much incentive and little to dissuade antidemocratic forces in Latin America from continuing to carry out coups.

But if countries in Latin America and the Caribbean work together to oppose extralegal regime changes, and demand consequences when coups are attempted, then perhaps the Latin American coup d’etat will become a relic of the past. There are important lessons from the regional response to the Honduras coup, when a majority of countries in the region loudly rejected the coup and would have overturned it, returning Zelaya to office, had the US not blocked this at the Organization of American States (OAS). The episode brought US-Latin American relations to a historic low and led to the creation of the Committee of Latin American and Caribbean States (CELAC), intended to be an alternative to the OAS, and which included all the countries of the Americas except for the US and Canada.

With the Pink Tide returning, and with the OAS especially tarnished following its disgraceful role in the lead-up to the Bolivia coup, regional integration initiatives like CELAC should be pursued even more vigorously than before. Otherwise, Latin American elites and their allies in the US will continue their attempts to veto democracy, and resort to using the bullet when the ballot doesn’t go their way.

The enduring legacy of Venezuela’s short-lived 2002 coup d’etat, and the subsequent countercoup, for US-Latin American relations

On April 11, 2002, Venezuela’s democratically elected government, headed by Hugo Chávez Frías, was ousted in a military coup d’etat. Then, dramatically, two days later, the coup was overturned by a mass mobilization of Venezuelans. They demanded the restoration of democracy and the return of a government that appeared to be making good on its commitment to redistribute Venezuela’s oil wealth to benefit the country’s most marginalized sectors. These events led to lasting ramifications not just for Venezuela, but for Latin America and the Caribbean as a whole, paving the way for a “pink tide” of progressive movements that took power democratically throughout the region. In many cases, similar power struggles ensued, pitting left-leaning governments supporting economic and social gains for the poor, the working class, and marginalized communities, against powerful factions of society seeking, generally, to maintain a status quo that has served to benefit mostly a small number of elites and foreign interests while exploiting and repressing the majority population.

The coup itself was not novel, of course, but it was the first Latin American coup in the twenty-first century, and showed that the US government would continue to prioritize its perceived geopolitical interests — and those of multinational corporations — in the region over democracy. The US would go on to support coups, and other sorts of undemocratic political transitions, in Haiti (2004), Honduras (2009), Paraguay (2012), Brazil (2016), and Bolivia (2019) — and would show support for attempted coups in Bolivia (2008), Ecuador (2010), and Venezuela (2019). Elements of the 2002 Venezuela coup playbook would also be repeated in many cases.

Much has since been written about the trajectory the Chávez government took following its survival of the coup, for better and for worse. The experiences of late 2002 and early 2003 (in which many of the same opposition forces continued their attempt to topple the government through a crippling months-long managerial strike that paralyzed the oil industry), and 2004, when Chávez handily survived a recall referendum, demonstrated both that Chávez had nothing to lose by turning farther left (he would proclaim his government’s goal of working toward “socialism for the twenty-first century” in 2005), and that he would need to take firm action if he were to gain control of the Venezuelan economy and be able to carry out his agenda. Chávez sacked PDVSA’s striking managers, which subsequently allowed Venezuela to achieve some of the strongest economic growth in the region for several years after. This was accompanied by impressive poverty reduction and the launching of the many misiones — programs designed to provide low-income Venezuelans with food, health care, education, and other needs.

The “self-proclaimed socialist” President Chávez (as international media loved to call him) that we remember now is really the post-coup Chávez. More than 20 years after he was first elected, it is easy to forget that he originally campaigned on a “third way” platform, calling to mind Tony Blair and Bill Clinton. So what did Chávez do in his first years that so upset his opponents, foreign and domestic, that they overthrew him?

At home, Chávez’s fledgling government embarked on long-overdue land reform. It enacted a new constitution, which consolidated a breaking of the old political order exemplified by the punto fijo pact that had ensured that political power alternated between the nominally social democratic Acción Democrática party and more conservative Christian democrat COPEI party. The traditional parties and factions lost seven elections in just three years.

On the global stage, amid the start of the US’s “Global War on Terror” and George W. Bush’s imperious declaration that “Either you are with us, or you are with the terrorists,” Chávez did not hesitate to harshly condemn the US bombing of Afghanistan and its predictable civilian death toll. Chávez’s government reinvigorated OPEC; its oil diplomacy led to production cuts and a global oil price stabilization. Worse, Chávez sought to renegotiate oil deals with foreign companies that, for years, had supplied US and other companies with cheap oil while providing little revenue to Venezuela itself. He stopped allowing US counternarcotics flights from entering Venezuelan airspace, and ended the US military presence at the Fuerte Tiuna military base. He was skeptical of the US effort to expand NAFTA throughout the hemisphere as the “Free Trade Area of the Americas.” And he conspicuously developed a close relationship with the Cuban government.

The US government was wary of Chávez well before he was elected president. Once he was in office, this began to turn toward open hostility, and in the months before the coup, some observers, such as John Pilger and Conn Hallinan, began to warn that a coup d’etat appeared likely.

Shortly after Chávez’s denunciations of the US war on Afghanistan in late 2001, which he made on TV while holding up photographs of Afghan children killed in US strikes, US military and intelligence agencies met to discuss their Venezuela strategy. Within Venezuela, militant opposition sectors launched a protracted effort to undermine the Chávez government with the goal of toppling it. Senior military officers held press conferences denouncing the “dictatorship” and calling for “civil disobedience” against the country’s recently reelected president. The main trade union federation, the Confederación de Trabajadores de Venezuela (CTV), close to the corrupt, centrist traditional parties that Chávez’s movement had made suddenly irrelevant, joined with the main business association, Fedecámaras, to launch a “general strike” (mostly involving temporary closures of small businesses rather than actual worker strikes).

It was against this backdrop of economic sabotage — and what was reported in the international media as organized labor’s discontent with the Chávez administration — that the coup took place. The catalyzing event that would justify military action against Chávez, and that would explain the quick emergence of a new, unelected government headed by Fedecámaras president Pedro Carmona, was violence connected to a massive opposition march on the presidential palace where marchers faced off against a wall of supporters of the elected government and presidential guard troops who fired tear gas at the opposition demonstrators. Snipers fired on the crowd, mostly killing chavistas, but Venezuela’s opposition-controlled private media blamed Chávez for the killings — accusations soon relayed by international media and the US State Department. This supposed chavista violence became a key part of the pretext for the coup and the narrative that, with the military turning on him, Chávez had decided to resign and flee. In fact, he was taken prisoner and held at military bases (where, Chávez would later claim, he was nearly executed).

Meanwhile, the hastily assembled coup regime abolished Venezuela’s Congress, Supreme Court, and constitution. The coup was greeted with applause in the US, with the International Republic Institute (IRI) — a US government-funded group set up in large part to “do today [what] was done covertly [before] by the CIA” — openly celebrating, and the New York Times praising Chávez’s removal in an editorial. The IMF quickly offered assistance to the “new administration” in prepared remarks just hours after the coup had transpired, suggesting that the Fund’s leaders may have had advance knowledge. (Several members of the US Congress would later ask the Fund to explain this, but never received more than a dismissive response.)

On the ground in Venezuela, some opposition leaders, some of whom are still prominent today, such as Leopoldo López, participated in the coup by helping to persecute and detain officials from the elected government. But what Carmona, López, and other coup supporters didn’t count on was the reaction of the Venezuelan people. Tens of thousands mobilized, coming down from the barrios that line the hillsides above Caracas, and marched on the presidential palace. Chávez retained supporters in the military as well, where he had first organized his revolutionary movement, and the combination of popular pressure and military support for the elected government — along with the revelation that Chávez never had, contrary to Venezuelan media claims, resigned — led to the coup being overturned on April 13.

The golpistas quickly began to back peddle; some who had signed the infamous “Carmona Decree” abolishing the democratic government would deny they had, or would express regret. International supporters of the overthrow of the elected government, including the New York Times, were forced to walk back their statements and admit they had betrayed principles of democratic governance.

Following his return, Chávez was emboldened; even more so after he survived the 2002–2003 oil lockout and took control of PDVSA. He easily triumphed in a 2004 recall referendum (Ricardo Hausmann’s baseless claims of a rigged vote notwithstanding). Within three years, Chávez moved away from his previous “third way” positioning and proclaimed that his government would pursue “socialism for the 21st century.”

Meanwhile, the “Pink Tide” took off, with the elections of Tabaré Vázquez in Uruguay (2004), Evo Morales in Bolivia (2005), Rafael Correa in Ecuador and Manuel Zelaya in Honduras (2006), and Fernando Lugo in Paraguay (2008), in addition to Lula da Silva (Brazil, 2002) and Néstor Kirchner (Argentina, 2003). Regional integration projects soon took off: the Bolivarian Alliance for the Peoples of Our America (ALBA), Petrocaribe and Petrosur (which provided discounted Venezuelan oil to neighboring countries), and UNASUR, among others. The Pink Tide governments also buried the US’s central policy priority for the region at the time: the Free Trade Area of the Americas, which would have expanded NAFTA throughout nearly the entire hemisphere. The Mar del Plata, Argentina summit where the FTAA met its end in 2005 was such a fiasco for the US government that President Bush left early.

Countering Venezuela became the main priority for the US in Latin America and the Caribbean, as a 2006 State Department memo, published by WikiLeaks, made clear. Scores of other cables record how often Venezuela would be a prime topic of discussion between US officials and government and civil society figures in the region, as first Bush and then the Obama administration attempted to stop countries from joining Petrocaribe and other Venezuela-led initiatives, despite privately acknowledging the significant economic benefits for the countries that joined them.

Despite its failure, the Venezuela coup fit a pattern for US-backed regime change efforts. NGOs and activist groups received funding and training from the US government and affiliated groups (notably, the National Endowment for Democracy, NED, of which the IRI is a core grantee). US officials and NED advisors worked hard, although with limited success, to get Venezuela’s opposition to unify and agree on a long-term strategy for throwing out the Chávez government. A similar playbook had been used in places like Serbia, and it would be implemented in subsequent coups in Haiti, Honduras, and Bolivia, with many of the same antagonists (the NED and its core grantees, major media outlets, the business community, and often the Catholic Church hierarchy and the military — except in Haiti, where the military was abolished, but active coup participants included former military).

Denial that a coup had happened after the fact is also a key element of the strategy, one that followed coups in Haiti, Honduras, and Bolivia as well. “It makes perfect sense that in a time when the international community frowns upon coups, that if one were to organize a coup, the first order of business would be to make the coup look like it was something else,” long-time Venezuela analyst Greg Wilpert wrote in an introduction to a 2003 book on the Venezuela coup. Yet internally, the US State Department itself referred to the events of April 2002 in Caracas as a “brief coup” (in 2004 and 2005 cables, for example).

In Haiti in 2004, the prevailing narrative put forward by US officials as well as most of the media was that the democratically elected president, Jean-Bertrand Aristide, had not been overthrown in a coup, but had “resigned” and chosen to flee the country. Never mind that Aristide and Haiti’s first lady were escorted onto a US plane by US Special Forces soldiers; that the Aristides had no idea where the plane was taking them; that Aristide said it had been a “‘new coup d’etat,’ or ‘modern kidnapping’”; and never mind that one of the only other witnesses to these events not in the employ of the US, Aristide’s helicopter pilot, would have the same description of these events as the Aristides. In the wake of the coup, it was easy for the media to overlook the hunting down and persecution of officials and supporters of the ousted government, as the media all but vacated Haiti after the coup, even as thousands were murdered and hundreds imprisoned on bogus charges. As with Venezuela in 2002, the coup government was quickly offered assistance by international finance institutions in Washington, which had previously enacted an aid embargo and had withheld hundreds of millions in loans to Aristide’s government. Some of the same individuals, affiliated with the IRI, even appear to have been involved in both the Venezuelan and Haitian coups.

The 2009 Honduras coup followed a similar playbook, with President Zelaya being forced onto a plane and flown out of the country (after it stopped at a US airbase to refuel) while coup supporters suggested that Zelaya had somehow staged the whole thing and that no coup had taken place. As with Venezuela in 2002, evidence suggests that US officials knew of the coup plans in advance, but there is no indication that they warned the democratically elected government. (It is notable that State Department cables published by WikiLeaks also show that US officials believed there was a credible threat to Evo Morales’s government in Bolivia in 2008, and that he even might be overthrown or killed, but this was not what the US government communicated to the world or to the Bolivian government at the time.)

The following year, Ecuador’s left-wing president, Rafael Correa, came close to being overthrown, and even killed, amid a dramatic confrontation with protesting police officers that ended in a shootout at a hospital where Correa was being treated after he was tear-gassed by the police. Paraguay’s progressive president Fernando Lugo, a former priest, was ousted in a parliamentary coup in 2012 that foreshadowed Brazil president Dilma Rousseff’s fate in 2016. In each of these cases, loud voices proclaimed that these were not “coups,” or coup attempts.

Though it was especially bloody, and racist violence and threats of violence were employed against officials of the elected government to force their departure, there are today still some (even in academia) who loudly deny that the Evo Morales government ended in a coup d’etat. Morales only resigned and left Bolivia after the head of the military asked him to resign, and even then, Morales almost didn’t make it out of Bolivia alive. Violent repression, including two notorious massacres of Indigenous Bolivians, followed the coup. The coup government targeted journalists and activists, and many former government officials were forced to flee the country or take shelter in embassies. Yet anyone who condemned these events as a “coup” was systematically criticized and harassed on social media.

The Bolivian coup, like Venezuela’s, would also effectively be overturned, but only after a year, through elections that were finally organized only after strikes and popular mobilizations demanding that elections be held. Morales’s Movement Toward Socialism (MAS) party won overwhelmingly, making it impossible for the pro-coup right to even make credible claims of election fraud. The elected government is attempting to hold the coup perpetrators accountable for their crimes, but the initial arrests and charging of top officials were promptly condemned by US officials and the likes of Human Rights Watch, who dismissed them as “revenge justice.”

Whether the Bolivian government will be able to successfully hold accountable those who overthrew an elected government, and those who were responsible for the repression and violence that took place under the coup government, is important not just for Bolivia, but for the region. If coup perpetrators rarely face consequences for their crimes, and if the US continues to condemn efforts to hold such individuals to account, there is much incentive and little to dissuade antidemocratic forces in Latin America from continuing to carry out coups.

But if countries in Latin America and the Caribbean work together to oppose extralegal regime changes, and demand consequences when coups are attempted, then perhaps the Latin American coup d’etat will become a relic of the past. There are important lessons from the regional response to the Honduras coup, when a majority of countries in the region loudly rejected the coup and would have overturned it, returning Zelaya to office, had the US not blocked this at the Organization of American States (OAS). The episode brought US-Latin American relations to a historic low and led to the creation of the Committee of Latin American and Caribbean States (CELAC), intended to be an alternative to the OAS, and which included all the countries of the Americas except for the US and Canada.

With the Pink Tide returning, and with the OAS especially tarnished following its disgraceful role in the lead-up to the Bolivia coup, regional integration initiatives like CELAC should be pursued even more vigorously than before. Otherwise, Latin American elites and their allies in the US will continue their attempts to veto democracy, and resort to using the bullet when the ballot doesn’t go their way.

On February 17, 2022, the House Financial Services Committee (HFSC) Subcommittee on National Security, International Development and Monetary Policy held a virtual hearing titled “The Role of the International Monetary Fund in a Changing Global Landscape.” The hearing addressed critical issues facing developing countries in their efforts to recover from the fallout of the COVID-19 pandemic, and proposed key steps forward for the International Monetary Fund (IMF, or Fund).

IMF Surcharges: Procyclical, Illogical, Unjust

One of the central topics of discussion was the IMF’s policy of imposing punitive and opaque surcharges, onerous fees that the Fund adds to the loan payments of countries with high levels of IMF debt. In recent years, the procyclical and regressive nature of these surcharges has gained increased attention, with civil society, development experts, and human rights advocates increasingly calling for their elimination. This growing demand for a reconsideration of IMF surcharge policy continued at the HFSC hearing.

“The IMF surcharges policy, which imposes extra, often hidden fees on to countries with high levels of debt, has been widely denounced as an unjust burden and a hindrance to our global … economic recovery by development experts and civil society organizations,” said Rep. Ayanna Pressley.

Hearing witness, Nobel laureate, and CEPR Advisory Board member Joseph Stiglitz is one such expert: “The IMF has come to increasingly rely on surcharges on borrowing countries to finance its operations. This is inappropriate and counterproductive. The IMF is supposed to help countries dealing with foreign exchange problems. It is now contributing to their foreign exchange problems through surcharges,” he said, adding: “Surcharges are procyclical. They go exactly against the objective of good economic policy.” 

Another witness, CEPR Senior Research Fellow Jayati Ghosh stated, “There is no logical reason for the surcharges … it’s a completely unnecessary imposition on countries that are distressed and cannot afford it.”

Citing CEPR research on the deadly costs of these surcharges, Rep. Pressley noted that “There was a recent report that reported that Argentina will spend more than $3 billion covering surcharges through 2023. I want us to sit with that. That is nine times the amount it would cost to vaccinate every single Argentinian against COVID-19.”

As Rep. Chuy García put it: “To me, this looks like the business model of payday lenders here in Chicago, not an economic development agency.” García went on to note the specific burden of surcharges on Ukraine: “We all know Ukraine is currently at risk of attack from Russia. What’s more? It’s only vaccinated about a third of its population, but Ukraine has to pay surcharge fees to the IMF.”

Rep. Stephen Lynch also cited the case of Ukraine, among others: “We got into this issue about surcharges on so-called middle-income countries. And just to be clear, we’re talking about Ukraine. We’re talking about Egypt, Argentina, Brazil. There hasn’t been any relief for those countries in terms of the surcharges that have been applied by the IMF… During the period of this pandemic, there’ll be about $4 billion paid by these countries to the IMF in terms of surcharge fees.” Lynch went on to call for the suspension of IMF surcharges.

Asked whether these surcharges should be halted during the pandemic, Ghosh responded: “Absolutely. I believe that right now in the continuing pandemic there should absolutely be a review. I believe the IMF should actually cancel this program altogether because it really does not make sense and it is not justified. I believe the U.S. government should actively propose this.” Rep. Pressley concurred: “Indeed, surcharges are an obstacle to our global economic recovery and our efforts to end this pandemic. And I agree, they should be abolished.”

Following the criticism of surcharges expressed by multiple witnesses and members of Congress, Subcommittee Chair Rep. Jim Himes committed to taking on the issue.

Special Drawing Rights For a Global COVID Response

Also a focus of discussion were IMF Special Drawing Rights (SDRs). SDRs are a unique, global reserve asset that can be issued to support developing countries in responding to the pandemic and encouraging an equitable global recovery — all at no cost to the United States. 

In August of 2021, the IMF approved a $650 billion SDR issuance, which was distributed according to IMF quotas. Though a positive step with a tremendous impact for countries around the world, this initial issuance remains insufficient. Civil society and Congressional leaders have called for an allocation of an additional $2-$3.5 billion, and for the fair rechanneling of SDRs held by wealthy countries like the United States to those that need them most. At the HFSC hearing:

Stiglitz described the initial issuance as “of extraordinary importance.” Ghosh agreed, stating that “The release of new SDRs has been crucial even though they are unequally distributed, because SDRs are automatic, they are debt free… they do not require fiscal conditionalities… and they are effectively costless.” Citing CEPR research, Ghosh noted that “At least 80 countries have already used their SDRs.. to add to their imports… to pay back the IMF… and for their own budget increases… This has added to some degree to helping the world economy revive, but it’s also helped the United States’ economy” by boosting demand for exports.

Rep. García similarly praised the initial allocation — stating that “last year’s issuance of SDRs was a tremendous success,” — and went on to call for more, citing his bill supporting the issuance of an additional $2 trillion in SDRs that was already approved by the House of representatives. Ghosh expressed her support for this proposal, stating that “a large allocation would play a huge role in determining a future recovery in the global economy.” Stiglitz agreed, and called for not only a new one-time issuance, but for regular annual issuances for years to come: “The international community has made a commitment to help developing countries make the green transition. An annual emission of SDRs would be a reliable way to achieve our climate commitments.”

Ghosh also highlighted the importance of rechanneling SDRs held by the United States, but criticized the IMF’s proposed rechanneling mechanism, the Resilience and Sustainability Trust (RST), citing its inadequate scale, its limited scope, the fact that it will add to national debt burdens, and the harmful conditionality that will likely come with it.

Daouda Sembene, Distinguished Non-Resident Fellow at the Center for Global Development, also called on wealthy countries to rechannel their SDRs to the countries that need them, and proposed that they partner with regional multilateral development banks to do so, stating, “We — especially the US and all the large shareholders — have to make sure that the IMF handles and manages these resources in the most effective way by partnering with other multilateral development banks… to make sure that they can take advantage of their expertise to fight climate change. That’s for one. The second issue is we are talking about $50 billion [in proposed SDR rechanneling], but don’t you forget that the G20 members have accumulated more than $440 billion out of the SDR allocation of $650 billion, so we are talking about money that is sitting there at the IMF not serving any purpose. Why wouldn’t the G20 accept on top of the $100 billion that it has pledged… to add all of that and use SDRs… [in] the fight of climate change?… It can go through the World Bank, it can go through regional development banks like ADP, or the African Development Bank… I think that would be the most effective way to mobilize more meaningful resources on the fight against climate change.”

Though the International Monetary Fund has a number of structural deficiencies limiting its ability to support a sustainable and equitable global recovery, addressing the issues discussed in this hearing — eliminating harmful surcharges, and re-issuing and fairly rechanneling SDRs — would be critical steps in the right direction. Read more about IMF surcharges here, and Special Drawing Rights here.

Watch the full hearing here.

On February 17, 2022, the House Financial Services Committee (HFSC) Subcommittee on National Security, International Development and Monetary Policy held a virtual hearing titled “The Role of the International Monetary Fund in a Changing Global Landscape.” The hearing addressed critical issues facing developing countries in their efforts to recover from the fallout of the COVID-19 pandemic, and proposed key steps forward for the International Monetary Fund (IMF, or Fund).

IMF Surcharges: Procyclical, Illogical, Unjust

One of the central topics of discussion was the IMF’s policy of imposing punitive and opaque surcharges, onerous fees that the Fund adds to the loan payments of countries with high levels of IMF debt. In recent years, the procyclical and regressive nature of these surcharges has gained increased attention, with civil society, development experts, and human rights advocates increasingly calling for their elimination. This growing demand for a reconsideration of IMF surcharge policy continued at the HFSC hearing.

“The IMF surcharges policy, which imposes extra, often hidden fees on to countries with high levels of debt, has been widely denounced as an unjust burden and a hindrance to our global … economic recovery by development experts and civil society organizations,” said Rep. Ayanna Pressley.

Hearing witness, Nobel laureate, and CEPR Advisory Board member Joseph Stiglitz is one such expert: “The IMF has come to increasingly rely on surcharges on borrowing countries to finance its operations. This is inappropriate and counterproductive. The IMF is supposed to help countries dealing with foreign exchange problems. It is now contributing to their foreign exchange problems through surcharges,” he said, adding: “Surcharges are procyclical. They go exactly against the objective of good economic policy.” 

Another witness, CEPR Senior Research Fellow Jayati Ghosh stated, “There is no logical reason for the surcharges … it’s a completely unnecessary imposition on countries that are distressed and cannot afford it.”

Citing CEPR research on the deadly costs of these surcharges, Rep. Pressley noted that “There was a recent report that reported that Argentina will spend more than $3 billion covering surcharges through 2023. I want us to sit with that. That is nine times the amount it would cost to vaccinate every single Argentinian against COVID-19.”

As Rep. Chuy García put it: “To me, this looks like the business model of payday lenders here in Chicago, not an economic development agency.” García went on to note the specific burden of surcharges on Ukraine: “We all know Ukraine is currently at risk of attack from Russia. What’s more? It’s only vaccinated about a third of its population, but Ukraine has to pay surcharge fees to the IMF.”

Rep. Stephen Lynch also cited the case of Ukraine, among others: “We got into this issue about surcharges on so-called middle-income countries. And just to be clear, we’re talking about Ukraine. We’re talking about Egypt, Argentina, Brazil. There hasn’t been any relief for those countries in terms of the surcharges that have been applied by the IMF… During the period of this pandemic, there’ll be about $4 billion paid by these countries to the IMF in terms of surcharge fees.” Lynch went on to call for the suspension of IMF surcharges.

Asked whether these surcharges should be halted during the pandemic, Ghosh responded: “Absolutely. I believe that right now in the continuing pandemic there should absolutely be a review. I believe the IMF should actually cancel this program altogether because it really does not make sense and it is not justified. I believe the U.S. government should actively propose this.” Rep. Pressley concurred: “Indeed, surcharges are an obstacle to our global economic recovery and our efforts to end this pandemic. And I agree, they should be abolished.”

Following the criticism of surcharges expressed by multiple witnesses and members of Congress, Subcommittee Chair Rep. Jim Himes committed to taking on the issue.

Special Drawing Rights For a Global COVID Response

Also a focus of discussion were IMF Special Drawing Rights (SDRs). SDRs are a unique, global reserve asset that can be issued to support developing countries in responding to the pandemic and encouraging an equitable global recovery — all at no cost to the United States. 

In August of 2021, the IMF approved a $650 billion SDR issuance, which was distributed according to IMF quotas. Though a positive step with a tremendous impact for countries around the world, this initial issuance remains insufficient. Civil society and Congressional leaders have called for an allocation of an additional $2-$3.5 billion, and for the fair rechanneling of SDRs held by wealthy countries like the United States to those that need them most. At the HFSC hearing:

Stiglitz described the initial issuance as “of extraordinary importance.” Ghosh agreed, stating that “The release of new SDRs has been crucial even though they are unequally distributed, because SDRs are automatic, they are debt free… they do not require fiscal conditionalities… and they are effectively costless.” Citing CEPR research, Ghosh noted that “At least 80 countries have already used their SDRs.. to add to their imports… to pay back the IMF… and for their own budget increases… This has added to some degree to helping the world economy revive, but it’s also helped the United States’ economy” by boosting demand for exports.

Rep. García similarly praised the initial allocation — stating that “last year’s issuance of SDRs was a tremendous success,” — and went on to call for more, citing his bill supporting the issuance of an additional $2 trillion in SDRs that was already approved by the House of representatives. Ghosh expressed her support for this proposal, stating that “a large allocation would play a huge role in determining a future recovery in the global economy.” Stiglitz agreed, and called for not only a new one-time issuance, but for regular annual issuances for years to come: “The international community has made a commitment to help developing countries make the green transition. An annual emission of SDRs would be a reliable way to achieve our climate commitments.”

Ghosh also highlighted the importance of rechanneling SDRs held by the United States, but criticized the IMF’s proposed rechanneling mechanism, the Resilience and Sustainability Trust (RST), citing its inadequate scale, its limited scope, the fact that it will add to national debt burdens, and the harmful conditionality that will likely come with it.

Daouda Sembene, Distinguished Non-Resident Fellow at the Center for Global Development, also called on wealthy countries to rechannel their SDRs to the countries that need them, and proposed that they partner with regional multilateral development banks to do so, stating, “We — especially the US and all the large shareholders — have to make sure that the IMF handles and manages these resources in the most effective way by partnering with other multilateral development banks… to make sure that they can take advantage of their expertise to fight climate change. That’s for one. The second issue is we are talking about $50 billion [in proposed SDR rechanneling], but don’t you forget that the G20 members have accumulated more than $440 billion out of the SDR allocation of $650 billion, so we are talking about money that is sitting there at the IMF not serving any purpose. Why wouldn’t the G20 accept on top of the $100 billion that it has pledged… to add all of that and use SDRs… [in] the fight of climate change?… It can go through the World Bank, it can go through regional development banks like ADP, or the African Development Bank… I think that would be the most effective way to mobilize more meaningful resources on the fight against climate change.”

Though the International Monetary Fund has a number of structural deficiencies limiting its ability to support a sustainable and equitable global recovery, addressing the issues discussed in this hearing — eliminating harmful surcharges, and re-issuing and fairly rechanneling SDRs — would be critical steps in the right direction. Read more about IMF surcharges here, and Special Drawing Rights here.

Watch the full hearing here.

NACLA

See article on original site

Book Review: International Solidarity in Action: The Relationship Between the United Electrical Workers (UE) and Frente Auténtico del Trabajo, by Robin Alexander

On February 3, workers at a General Motors plant in Silao, Mexico, secured an important victory for organized labor when a huge majority voted to join the Sindicato Independiente Nacional de Trabajadores y Trabajadoras de la Industria Automotriz (SINTTIA), an independent labor union. Major international media outlets such as The New York Times and Reuters covered the election, noting its historic importance. Organized labor in Mexico has long been infamous for charro unions, company unions that typically offer workers little actual recourse for improving workplace conditions or in negotiating better compensation. This situation has contributed to prolonged wage stagnation. As the Times reported:

Though the country has become one of the richest in Latin America, its workers still earn among the lowest salaries of almost any nation in the region. One important reason, economists say, is that for decades, Mexican workers have had little say in choosing the unions that represent them.

The SINTTIA victory in Silao comes after decades of hard-fought struggles by independent and democratic labor unions in Mexico that have challenged hostile and sometimes violent anti-unionization campaigns. Their efforts have confronted employers, corrupt and entrenched charro unions, and the system of neoliberal globalization itself, manifest in structures such as the North American Free Trade Agreement (NAFTA) and the World Trade Organization (WTO) that pit workers in Mexico against their counterparts in the United States and Canada. “These deals were about putting US manufacturing workers in direct competition with much-lower-paid workers in the developing world….” economist (and my colleague) Dean Baker has written. “This also put downward pressure on the wages of the manufacturing workers who kept their jobs, as well as on the wages of less-educated workers more generally, since manufacturing has historically been a source of relatively high-paying employment for workers without college degrees.”

The effects of 28 years of NAFTA — and its successor, the US-Mexico-Canada Agreement — on Mexico should surprise no one. As NAFTA was being debated in the early 1990s, Mexican President Carlos Salinas de Gortari claimed that the trade and investment arrangement would make Mexico a “first world” country and lift living standards up closer to those in the United States and Canada. But after 20 years, the poverty rate in Mexico was higher than in 1994 when NAFTA first went into effect.

Now that Mexico’s workers are having more of a say in choosing their union representation, will they finally start to see real improvements in how they live? It’s an important step in obtaining and exercising more power and agency to make further demands on the business sector and the government, and it is the latest chapter in a history of labor organizing and campaigns going back 30 years. International labor solidarity is also an important part of this story.

The new e-book, International Solidarity in Action: The Relationship Between the United Electrical Workers (UE) and Frente Auténtico del Trabajo, by Robin Alexander tells some of this history from a first-hand perspective. As the first International Affairs Director of the UE, Alexander was there at the start of cross-border labor union campaigning against NAFTA, through to the deal’s 20-year anniversary. It was their shared opposition to NAFTA that led the UE and the FAT, both independent unions, to develop a close working relationship, beginning in 1992. As Alexander details, the bonds between the two unions soon became much closer, and their combined efforts came to include support for shop organizing, strike support, fundraising, labor law reform, and other activities. Along the way, the FAT and other independent unions in Mexico scored historic victories, leading eventually to the labor law reforms that made organizing wins, like the one at Silao, possible. These included holding the first secret-ballot union election in Mexico’s history (in the early ‘90s), and, along with the UE and other unions such as the Teamsters, lodging some of the first complaints under the North American Agreement on Labor Cooperation (NAALC), NAFTA’s labor side-agreement, in attempts to defend workers’ rights (in 1994).

The UE and the FAT would seem to be natural partners. Both are highly democratic in structure, with rank-and-file governance, and both are independent of labor union federations that might exert influence or control over their decisions and activities. This has allowed the unions to be out front in important struggles, and early labor opposition to NAFTA was one such case. The FAT was the only Mexican union to go to an initial, important pan-North American labor meeting in 1992 to organize against NAFTA. The UE, one of the only industrial unions to survive the McCarthy era purges of communists from US labor, and which did not cooperate with the related witch hunts at the time, has long been independent of the major US-Canadian union federation, the AFL-CIO. It was also one of the first unions to begin organizing across borders against NAFTA.

The reluctance of the AFL-CIO — as well as the Canadian Labor Congress — to partner with the FAT, even against as serious a threat as NAFTA, was itself a legacy of Cold War thinking and practice, stemming from the AFL-CIO and CLC belonging to the International Confederation of Free Trade Unions (ICFTU). Unlike the FAT, ICFTU Mexican labor partner the Confederación de Trabajadores de Mexico, which was closely aligned with Salinas’s political party (the PRI), supported NAFTA. The AFL-CIO would soon abandon this self-defeating stance and also partner with the FAT — an early example of how UE-FAT solidarity would lead to important changes.

Solidarity in practice

Alexander recounts many examples of how exchanges between the two unions, and others in Canada, Japan, India, and elsewhere, enabled various forms of direct and concrete solidarity. These included meetings, speaking tours, shop visits, and other in-person travel that both gave rank-and-file members a political education and fostered solidarity and comradery among union members. These interactions often led US and Canadian unionists to abandon previously xenophobic ideas about immigration and its root causes. “ONLY through a serious, concerted member-to-member international solidarity effort will US workers understand that their boss at home is the same boss of workers abroad and then take the next step to link arms with these workers in an active international expression that ‘An injury to one IS an injury to all,’” Alexander quotes former UE president Peter Knowlton as saying.

Sometimes cross-border solidarity resulted in concrete advances for FAT members. Alexander describes how fundraising by UE members in a campaign called “Buck-a-Brick” helped to construct a new union hall for municipal workers in Guerrero, Chihuahua:

This initiative, which came from Local 222…not only raised funds for UE’s allies in Mexico but became a mechanism for the local to engage its members and those of other UE locals in discussions about the importance of international solidarity. Each person who donated a dollar received a paper with an image of the number of symbolic bricks he or she had contributed. The campaign was subsequently adopted by UE’s Northeast Region, which proudly presented a check for $1,300 to the FAT representative who attended the UE convention that Fall as a contribution to the next phase of construction of the union hall in Guerrero, Chihuahua. In addition to raising funds for their sister union in Mexico, this effort helped to create a broader understanding of the UE’s international work within the union’s national membership, as well as education on the question of immigration.

International pressure from the UE also led to the reversal of public sector worker layoffs in Guerrero, which Alexander rightly recalls as “some amazingly effective international solidarity.”

As Alexander, a labor attorney, details, all of these efforts and others also facilitated historic changes to Mexican labor law that would pave the way for the growth of independent unions. Initial changes to labor law under former president Felipe Calderon in 2012 were “a serious step backward.” But Mexican union resistance, with international support from the UE and other US and Canadian labor unions — as well as the US and Canadian governments, which have seen Mexico’s pervasive and chronically low wages as an unfair trade advantage — led to the drafting of new, more union-friendly laws under the subsequent administration of Enrique Peña Nieto, and to more reforms under the current Andrés Manuel López Obrador government. Under López Obrador, following the renegotiation of NAFTA, workers have challenged unfair labor practices via the US-Mexico-Canada Agreement, often with the support of unions in the United States and Canada.

These landmark reforms are the result of 30 years of struggle for more democratic unions, democratic workplaces, and the freedom for workers to choose independent union representation. While Mexican workers and their independent unions have definitely been the driving forces in pushing through meaningful and lasting advances for labor, international solidarity has been an important factor as well. As with countless other examples of societal advances through collective action, this is a history that might not be told accurately and honestly, if at all, except by those who were there. Robin Alexander’s account is a valuable people’s history, told from the US side, filled with examples to be emulated, some pitfalls to avoid, and above all, boundless inspiration.

NACLA

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Book Review: International Solidarity in Action: The Relationship Between the United Electrical Workers (UE) and Frente Auténtico del Trabajo, by Robin Alexander

On February 3, workers at a General Motors plant in Silao, Mexico, secured an important victory for organized labor when a huge majority voted to join the Sindicato Independiente Nacional de Trabajadores y Trabajadoras de la Industria Automotriz (SINTTIA), an independent labor union. Major international media outlets such as The New York Times and Reuters covered the election, noting its historic importance. Organized labor in Mexico has long been infamous for charro unions, company unions that typically offer workers little actual recourse for improving workplace conditions or in negotiating better compensation. This situation has contributed to prolonged wage stagnation. As the Times reported:

Though the country has become one of the richest in Latin America, its workers still earn among the lowest salaries of almost any nation in the region. One important reason, economists say, is that for decades, Mexican workers have had little say in choosing the unions that represent them.

The SINTTIA victory in Silao comes after decades of hard-fought struggles by independent and democratic labor unions in Mexico that have challenged hostile and sometimes violent anti-unionization campaigns. Their efforts have confronted employers, corrupt and entrenched charro unions, and the system of neoliberal globalization itself, manifest in structures such as the North American Free Trade Agreement (NAFTA) and the World Trade Organization (WTO) that pit workers in Mexico against their counterparts in the United States and Canada. “These deals were about putting US manufacturing workers in direct competition with much-lower-paid workers in the developing world….” economist (and my colleague) Dean Baker has written. “This also put downward pressure on the wages of the manufacturing workers who kept their jobs, as well as on the wages of less-educated workers more generally, since manufacturing has historically been a source of relatively high-paying employment for workers without college degrees.”

The effects of 28 years of NAFTA — and its successor, the US-Mexico-Canada Agreement — on Mexico should surprise no one. As NAFTA was being debated in the early 1990s, Mexican President Carlos Salinas de Gortari claimed that the trade and investment arrangement would make Mexico a “first world” country and lift living standards up closer to those in the United States and Canada. But after 20 years, the poverty rate in Mexico was higher than in 1994 when NAFTA first went into effect.

Now that Mexico’s workers are having more of a say in choosing their union representation, will they finally start to see real improvements in how they live? It’s an important step in obtaining and exercising more power and agency to make further demands on the business sector and the government, and it is the latest chapter in a history of labor organizing and campaigns going back 30 years. International labor solidarity is also an important part of this story.

The new e-book, International Solidarity in Action: The Relationship Between the United Electrical Workers (UE) and Frente Auténtico del Trabajo, by Robin Alexander tells some of this history from a first-hand perspective. As the first International Affairs Director of the UE, Alexander was there at the start of cross-border labor union campaigning against NAFTA, through to the deal’s 20-year anniversary. It was their shared opposition to NAFTA that led the UE and the FAT, both independent unions, to develop a close working relationship, beginning in 1992. As Alexander details, the bonds between the two unions soon became much closer, and their combined efforts came to include support for shop organizing, strike support, fundraising, labor law reform, and other activities. Along the way, the FAT and other independent unions in Mexico scored historic victories, leading eventually to the labor law reforms that made organizing wins, like the one at Silao, possible. These included holding the first secret-ballot union election in Mexico’s history (in the early ‘90s), and, along with the UE and other unions such as the Teamsters, lodging some of the first complaints under the North American Agreement on Labor Cooperation (NAALC), NAFTA’s labor side-agreement, in attempts to defend workers’ rights (in 1994).

The UE and the FAT would seem to be natural partners. Both are highly democratic in structure, with rank-and-file governance, and both are independent of labor union federations that might exert influence or control over their decisions and activities. This has allowed the unions to be out front in important struggles, and early labor opposition to NAFTA was one such case. The FAT was the only Mexican union to go to an initial, important pan-North American labor meeting in 1992 to organize against NAFTA. The UE, one of the only industrial unions to survive the McCarthy era purges of communists from US labor, and which did not cooperate with the related witch hunts at the time, has long been independent of the major US-Canadian union federation, the AFL-CIO. It was also one of the first unions to begin organizing across borders against NAFTA.

The reluctance of the AFL-CIO — as well as the Canadian Labor Congress — to partner with the FAT, even against as serious a threat as NAFTA, was itself a legacy of Cold War thinking and practice, stemming from the AFL-CIO and CLC belonging to the International Confederation of Free Trade Unions (ICFTU). Unlike the FAT, ICFTU Mexican labor partner the Confederación de Trabajadores de Mexico, which was closely aligned with Salinas’s political party (the PRI), supported NAFTA. The AFL-CIO would soon abandon this self-defeating stance and also partner with the FAT — an early example of how UE-FAT solidarity would lead to important changes.

Solidarity in practice

Alexander recounts many examples of how exchanges between the two unions, and others in Canada, Japan, India, and elsewhere, enabled various forms of direct and concrete solidarity. These included meetings, speaking tours, shop visits, and other in-person travel that both gave rank-and-file members a political education and fostered solidarity and comradery among union members. These interactions often led US and Canadian unionists to abandon previously xenophobic ideas about immigration and its root causes. “ONLY through a serious, concerted member-to-member international solidarity effort will US workers understand that their boss at home is the same boss of workers abroad and then take the next step to link arms with these workers in an active international expression that ‘An injury to one IS an injury to all,’” Alexander quotes former UE president Peter Knowlton as saying.

Sometimes cross-border solidarity resulted in concrete advances for FAT members. Alexander describes how fundraising by UE members in a campaign called “Buck-a-Brick” helped to construct a new union hall for municipal workers in Guerrero, Chihuahua:

This initiative, which came from Local 222…not only raised funds for UE’s allies in Mexico but became a mechanism for the local to engage its members and those of other UE locals in discussions about the importance of international solidarity. Each person who donated a dollar received a paper with an image of the number of symbolic bricks he or she had contributed. The campaign was subsequently adopted by UE’s Northeast Region, which proudly presented a check for $1,300 to the FAT representative who attended the UE convention that Fall as a contribution to the next phase of construction of the union hall in Guerrero, Chihuahua. In addition to raising funds for their sister union in Mexico, this effort helped to create a broader understanding of the UE’s international work within the union’s national membership, as well as education on the question of immigration.

International pressure from the UE also led to the reversal of public sector worker layoffs in Guerrero, which Alexander rightly recalls as “some amazingly effective international solidarity.”

As Alexander, a labor attorney, details, all of these efforts and others also facilitated historic changes to Mexican labor law that would pave the way for the growth of independent unions. Initial changes to labor law under former president Felipe Calderon in 2012 were “a serious step backward.” But Mexican union resistance, with international support from the UE and other US and Canadian labor unions — as well as the US and Canadian governments, which have seen Mexico’s pervasive and chronically low wages as an unfair trade advantage — led to the drafting of new, more union-friendly laws under the subsequent administration of Enrique Peña Nieto, and to more reforms under the current Andrés Manuel López Obrador government. Under López Obrador, following the renegotiation of NAFTA, workers have challenged unfair labor practices via the US-Mexico-Canada Agreement, often with the support of unions in the United States and Canada.

These landmark reforms are the result of 30 years of struggle for more democratic unions, democratic workplaces, and the freedom for workers to choose independent union representation. While Mexican workers and their independent unions have definitely been the driving forces in pushing through meaningful and lasting advances for labor, international solidarity has been an important factor as well. As with countless other examples of societal advances through collective action, this is a history that might not be told accurately and honestly, if at all, except by those who were there. Robin Alexander’s account is a valuable people’s history, told from the US side, filled with examples to be emulated, some pitfalls to avoid, and above all, boundless inspiration.

On January 27, Xiomara Castro was sworn in as president of Honduras after a decisive win in the November 28, 2021 general election. The incoming government inherits an economy struggling to recover from the COVID-19 pandemic as well as from two devastating hurricanes in 2020. Even without these crises, the situation is challenging: the 2009 coup that overthrew the democratically elected government of Castro’s husband, Manuel Zelaya (2006–2009), was followed by 12 years of National Party rule marred by endemic corruption, electoral fraud and interference, social unrest, and violent state-led repression.

In 2009, 2013, and 2017, the Center for Economic and Policy Research (CEPR) published research on the evolving social and economic situations in Honduras. This post will do the same, in order to provide more context to Castro’s historic inauguration.

Economic growth: From 2006 to 2008, Honduras experienced steady annual per capita GDP growth averaging 3.3 percent[1], higher than in El Salvador and Guatemala, but significantly less than in Costa Rica.

In the decade following the 2009 coup in Honduras and the global recession (2010–2019), Honduras averaged per capita GDP growth of just 1.8 percent per year, higher than Guatemala, but below El Salvador and Costa Rica. However, the decline in average per capita GDP growth from the pre-coup period to the post-coup period was 1.5 percentage points, the largest drop among these countries, except for Costa Rica.

In 2020, under the weight of the pandemic-induced recession, the Honduran economy contracted more heavily than all of these Central American neighbors, seeing a drop in per capita GDP of more than 10.5 percent. This was also due in part to the economic effects of Hurricanes Eta and Iota, which hit Honduras less than two weeks apart in November 2020.

Despite a partial recovery in 2021 — outpaced by neighboring Guatemala and El Salvador, though slightly stronger than Costa Rica — Honduras’s per capita GDP in 2021 was still lower than it was as far back as 2015.

Poverty:[2] Addressing poverty will be an important task for the Castro administration. Poverty trended downward in the 2005–2009 pre-coup era, dipping below 60 percent. But after the coup, from 2010 to 2018, the number of households living in poverty remained above 60 percent. This figure reached as high as 66.5 percent in 2012 before trending downward to 59.3 percent in 2019.

The pandemic and its subsequent economic recession erased those modest gains, however. As noted in a Honduran government estimate from July 2021, the poverty rate reached as high as 73.6 percent, with 53.7 percent of households in extreme poverty, the highest level for both measures in the entire period from 2005 to 2021.

Income inequality: Honduras was a very unequal country in the pre-coup era, and has remained that way since. This is evident when looking at income share received by the lowest 20 percent of the population versus the highest 20 percent of the population, for the latest year available. In 2019, the poorest 20 percent received 3.6 percent of income, while the richest 20 percent received 52.2 percent — almost 15 times as much.

As seen in the figure below, the income share for the richest 20 percent generally trended downward from 2005 to 2019, dropping a total of 10.7 percentage points. For the poorest 20 percent, the income share had a modest trend upward over the same period, rising 1.7 percentage points.

However, these modest reductions in inequality were concentrated in the pre-coup era. The income share for the poorest 20 percent rose by 74 percent (1.4 percentage points) from 2005 to 2009, yet it only rose by 9 percent (0.3 percentage points) over the next 10 years.

The losses for the richest 20 percent also slowed after the coup. Pre-coup (2005–2009), the richest 20 percent saw their income share fall by 12 percent (7.5 percentage points). After the coup, it fell by only 6 percent (3.2 percentage points), despite the time period being twice as long (2009–2019).

Unemployment:[3] Headline unemployment figures only provide part of the picture of the labor market, especially in developing countries such as Honduras that have large informal work sectors. The graph below shows total underemployment, which includes unemployment and subemployment.

During the Zelaya administration (2006–2009), unemployment and underemployment generally declined. Unemployment hovered around 3 percent, with total underemployment reaching as low as 35.6 percent in 2008.

In contrast, underemployment trended upwards in the decade since the coup — dropping to pre-coup rates briefly in 2014 — before exploding to 81.6 percent in 2020. Unemployment followed a similar, but more muted trend, before also jumping to 10.9 percent in 2020.

In 2021, these figures decreased, but not enough to reach pre-pandemic levels — much less pre-coup levels.

Underemployment by gender: Again, underemployment by gender follows a pre-coup and postcoup pattern. Pre-coup underemployment for both men and women trended downward. Postcoup, both measures have trended upward. Although women in Honduras have historically experienced a lower underemployment rate than men, the rates became comparable in 2015.

In many countries, the COVID-19 pandemic has had an especially disproportionate impact on women’s participation in the labor force, and this holds true in the case of Honduras. Underemployment among women increased to a shocking 84.6 percent in 2020. This is more than a 20 percentage point increase from 2019, and affected over 385,000 additional women in a country with a total population of less than 5 million women. In contrast, the underemployment rate for men had a much more muted increase in 2020.

In 2021, unemployment for men recovered more significantly than it did for women, suggesting that underemployment for women may remain higher than for men in the near future.

Remittances: Remittances to Honduras — the vast majority of which come from family members living in the United States — represent a significant portion of the Honduran economy. Honduras’s remittances received as a percent of GDP track closely with neighboring El Salvador’s, and are vastly higher than both Guatemala and Costa Rica’s — the latter being a country in which remittances play a very small role in the economy. This reflects, in part, decades of migration flows from Honduras and El Salvador due to poor social and economic conditions and increased insecurity.

After hovering around 20 percent of the country’s GDP prior to the global recession and the coup and then declining in the wake of the global recession in 2009, remittances have steadily increased as a share of Honduras’s GDP since 2012.

That figure could reach as high as 28 percent for 2021, due in part to Honduras’s modest economic growth, as discussed above, and because of an increase in the volume of remittances. It is estimated that from 2020 to 2021 alone, the total value of remittances Hondurans received increased by more than 20 percent.

Expenditures:[4] Since Juan Orlando Hernández took office in 2014, defense and security expenditures have risen steadily as a percent of government spending. This contrasts with social spending on health services and education, which have not experienced similar increases, and even decreased some. In 2019, defense and security spending outpaced health spending.

In 2020 — the first year of the pandemic — education and defense spending declined, while health spending experienced only a modest increase. Though defense spending as a percent of government spending declined a full percentage point from 2019 to 2020 — due in part to a large increase in debt service payments in 2020 — education expenditures saw an even larger decrease over that same time period.

COVID-19:[5] COVID has caused more than 10,000 reported deaths in Honduras since the pandemic began, a mortality rate higher than in both El Salvador and Guatemala. Honduras has managed to vaccinate less than half of its population based on the latest data, which is significantly lower than for Costa Rica and El Salvador, though 15 percentage points higher than for Guatemala.

Public debt: Better management of the country’s debt burden will be an important task for the incoming government, as President Castro noted in her inaugural address. In the pre-coup era, both debt as a percent of GDP and interest payments as a percent of GDP declined and somewhat stabilized.

After the coup and global recession, both debt and interest payments as a percent of GDP generally trended upward and reached highs during the pandemic. Countries for whom interest payments represent a large portion of their external debt service can be in an unsustainable position, especially when the external debt is held mostly in foreign currencies (as is the case in Honduras).

Recent IMF projections for Honduras, however, show Honduras’s debt as a percent of GDP peaking in 2020 before beginning to slowly decline over the next four years.

[1] Data for 2009 are excluded in this graph. Per capita GDP growth figures for that year reflect the effects of the global economic recession.

[2] Honduras defines poverty as those households whose income is less than the cost of the market basket, which includes basic provisions and needs such as housing, education, heath, and transportation. Extreme poverty is a measure of households that have a per capita income below the cost of a basic food basket. In 2020, Honduras released a new methodology for measuring poverty. This new methodology results in a significantly lower poverty rate — by nearly 20 percent — than the original methodology. The above graph employs the original methodology and is consistent with prior CEPR research.

[3] Honduras defines as unemployed all those who are not employed, yet desire to be, and have searched for employment during the four weeks prior to the time of the survey. Underemployment includes unemployment and subemployment. Subemployment is a measure of labor insecurity which includes workers who earn less than the minimum wage or work fewer hours than they would like, and thus provides a more complete picture of the labor market.

[4] Data on 2021 expenditures are not yet available. Expenditures data include central and decentralized government spending.

[5] Excess deaths, instead of deaths per 100,000 people, would likely be a more accurate measure of mortality due to the pandemic. However, excess deaths data for many countries, including Honduras, are not widely available. Because Costa Rica is about 3.5 times richer than Honduras on a per capita GDP basis, and a little less than 2.5 times richer than El Salvador and Guatemala, it may have health infrastructure that more accurately accounts for COVID-19 mortality. This might suggest that El Salvador, Guatemala, and Honduras’s performance in preventing COVID-19 deaths is overstated when compared to Costa Rica.

On January 27, Xiomara Castro was sworn in as president of Honduras after a decisive win in the November 28, 2021 general election. The incoming government inherits an economy struggling to recover from the COVID-19 pandemic as well as from two devastating hurricanes in 2020. Even without these crises, the situation is challenging: the 2009 coup that overthrew the democratically elected government of Castro’s husband, Manuel Zelaya (2006–2009), was followed by 12 years of National Party rule marred by endemic corruption, electoral fraud and interference, social unrest, and violent state-led repression.

In 2009, 2013, and 2017, the Center for Economic and Policy Research (CEPR) published research on the evolving social and economic situations in Honduras. This post will do the same, in order to provide more context to Castro’s historic inauguration.

Economic growth: From 2006 to 2008, Honduras experienced steady annual per capita GDP growth averaging 3.3 percent[1], higher than in El Salvador and Guatemala, but significantly less than in Costa Rica.

In the decade following the 2009 coup in Honduras and the global recession (2010–2019), Honduras averaged per capita GDP growth of just 1.8 percent per year, higher than Guatemala, but below El Salvador and Costa Rica. However, the decline in average per capita GDP growth from the pre-coup period to the post-coup period was 1.5 percentage points, the largest drop among these countries, except for Costa Rica.

In 2020, under the weight of the pandemic-induced recession, the Honduran economy contracted more heavily than all of these Central American neighbors, seeing a drop in per capita GDP of more than 10.5 percent. This was also due in part to the economic effects of Hurricanes Eta and Iota, which hit Honduras less than two weeks apart in November 2020.

Despite a partial recovery in 2021 — outpaced by neighboring Guatemala and El Salvador, though slightly stronger than Costa Rica — Honduras’s per capita GDP in 2021 was still lower than it was as far back as 2015.

Poverty:[2] Addressing poverty will be an important task for the Castro administration. Poverty trended downward in the 2005–2009 pre-coup era, dipping below 60 percent. But after the coup, from 2010 to 2018, the number of households living in poverty remained above 60 percent. This figure reached as high as 66.5 percent in 2012 before trending downward to 59.3 percent in 2019.

The pandemic and its subsequent economic recession erased those modest gains, however. As noted in a Honduran government estimate from July 2021, the poverty rate reached as high as 73.6 percent, with 53.7 percent of households in extreme poverty, the highest level for both measures in the entire period from 2005 to 2021.

Income inequality: Honduras was a very unequal country in the pre-coup era, and has remained that way since. This is evident when looking at income share received by the lowest 20 percent of the population versus the highest 20 percent of the population, for the latest year available. In 2019, the poorest 20 percent received 3.6 percent of income, while the richest 20 percent received 52.2 percent — almost 15 times as much.

As seen in the figure below, the income share for the richest 20 percent generally trended downward from 2005 to 2019, dropping a total of 10.7 percentage points. For the poorest 20 percent, the income share had a modest trend upward over the same period, rising 1.7 percentage points.

However, these modest reductions in inequality were concentrated in the pre-coup era. The income share for the poorest 20 percent rose by 74 percent (1.4 percentage points) from 2005 to 2009, yet it only rose by 9 percent (0.3 percentage points) over the next 10 years.

The losses for the richest 20 percent also slowed after the coup. Pre-coup (2005–2009), the richest 20 percent saw their income share fall by 12 percent (7.5 percentage points). After the coup, it fell by only 6 percent (3.2 percentage points), despite the time period being twice as long (2009–2019).

Unemployment:[3] Headline unemployment figures only provide part of the picture of the labor market, especially in developing countries such as Honduras that have large informal work sectors. The graph below shows total underemployment, which includes unemployment and subemployment.

During the Zelaya administration (2006–2009), unemployment and underemployment generally declined. Unemployment hovered around 3 percent, with total underemployment reaching as low as 35.6 percent in 2008.

In contrast, underemployment trended upwards in the decade since the coup — dropping to pre-coup rates briefly in 2014 — before exploding to 81.6 percent in 2020. Unemployment followed a similar, but more muted trend, before also jumping to 10.9 percent in 2020.

In 2021, these figures decreased, but not enough to reach pre-pandemic levels — much less pre-coup levels.

Underemployment by gender: Again, underemployment by gender follows a pre-coup and postcoup pattern. Pre-coup underemployment for both men and women trended downward. Postcoup, both measures have trended upward. Although women in Honduras have historically experienced a lower underemployment rate than men, the rates became comparable in 2015.

In many countries, the COVID-19 pandemic has had an especially disproportionate impact on women’s participation in the labor force, and this holds true in the case of Honduras. Underemployment among women increased to a shocking 84.6 percent in 2020. This is more than a 20 percentage point increase from 2019, and affected over 385,000 additional women in a country with a total population of less than 5 million women. In contrast, the underemployment rate for men had a much more muted increase in 2020.

In 2021, unemployment for men recovered more significantly than it did for women, suggesting that underemployment for women may remain higher than for men in the near future.

Remittances: Remittances to Honduras — the vast majority of which come from family members living in the United States — represent a significant portion of the Honduran economy. Honduras’s remittances received as a percent of GDP track closely with neighboring El Salvador’s, and are vastly higher than both Guatemala and Costa Rica’s — the latter being a country in which remittances play a very small role in the economy. This reflects, in part, decades of migration flows from Honduras and El Salvador due to poor social and economic conditions and increased insecurity.

After hovering around 20 percent of the country’s GDP prior to the global recession and the coup and then declining in the wake of the global recession in 2009, remittances have steadily increased as a share of Honduras’s GDP since 2012.

That figure could reach as high as 28 percent for 2021, due in part to Honduras’s modest economic growth, as discussed above, and because of an increase in the volume of remittances. It is estimated that from 2020 to 2021 alone, the total value of remittances Hondurans received increased by more than 20 percent.

Expenditures:[4] Since Juan Orlando Hernández took office in 2014, defense and security expenditures have risen steadily as a percent of government spending. This contrasts with social spending on health services and education, which have not experienced similar increases, and even decreased some. In 2019, defense and security spending outpaced health spending.

In 2020 — the first year of the pandemic — education and defense spending declined, while health spending experienced only a modest increase. Though defense spending as a percent of government spending declined a full percentage point from 2019 to 2020 — due in part to a large increase in debt service payments in 2020 — education expenditures saw an even larger decrease over that same time period.

COVID-19:[5] COVID has caused more than 10,000 reported deaths in Honduras since the pandemic began, a mortality rate higher than in both El Salvador and Guatemala. Honduras has managed to vaccinate less than half of its population based on the latest data, which is significantly lower than for Costa Rica and El Salvador, though 15 percentage points higher than for Guatemala.

Public debt: Better management of the country’s debt burden will be an important task for the incoming government, as President Castro noted in her inaugural address. In the pre-coup era, both debt as a percent of GDP and interest payments as a percent of GDP declined and somewhat stabilized.

After the coup and global recession, both debt and interest payments as a percent of GDP generally trended upward and reached highs during the pandemic. Countries for whom interest payments represent a large portion of their external debt service can be in an unsustainable position, especially when the external debt is held mostly in foreign currencies (as is the case in Honduras).

Recent IMF projections for Honduras, however, show Honduras’s debt as a percent of GDP peaking in 2020 before beginning to slowly decline over the next four years.

[1] Data for 2009 are excluded in this graph. Per capita GDP growth figures for that year reflect the effects of the global economic recession.

[2] Honduras defines poverty as those households whose income is less than the cost of the market basket, which includes basic provisions and needs such as housing, education, heath, and transportation. Extreme poverty is a measure of households that have a per capita income below the cost of a basic food basket. In 2020, Honduras released a new methodology for measuring poverty. This new methodology results in a significantly lower poverty rate — by nearly 20 percent — than the original methodology. The above graph employs the original methodology and is consistent with prior CEPR research.

[3] Honduras defines as unemployed all those who are not employed, yet desire to be, and have searched for employment during the four weeks prior to the time of the survey. Underemployment includes unemployment and subemployment. Subemployment is a measure of labor insecurity which includes workers who earn less than the minimum wage or work fewer hours than they would like, and thus provides a more complete picture of the labor market.

[4] Data on 2021 expenditures are not yet available. Expenditures data include central and decentralized government spending.

[5] Excess deaths, instead of deaths per 100,000 people, would likely be a more accurate measure of mortality due to the pandemic. However, excess deaths data for many countries, including Honduras, are not widely available. Because Costa Rica is about 3.5 times richer than Honduras on a per capita GDP basis, and a little less than 2.5 times richer than El Salvador and Guatemala, it may have health infrastructure that more accurately accounts for COVID-19 mortality. This might suggest that El Salvador, Guatemala, and Honduras’s performance in preventing COVID-19 deaths is overstated when compared to Costa Rica.

On August 23, 2021, the International Monetary Fund (IMF) allocated $650 billion worth of Special Drawing Rights (SDRs) to its members to add liquidity to the global economy during the unprecedented health and economic crises caused by COVID-19. 

SDRs, which are an international reserve asset, can be exchanged for hard currency, used to pay the IMF, or donated among member countries. The injection of these assets by the IMF can be used by governments to stabilize their currencies and shore up their reserves, or for a number of social or health policies — the latter being an especially important use for SDRs during the pandemic, as IMF Managing Director Kristalina Georgieva has said

Around a third of the SDRs were allocated to developing countries (excluding China, whose currency is included in the basket of currencies that determines the value of SDRs). 

CEPR has been publishing monthly reports on the use of SDRs based on accounting calculations derived from IMF SDR data, IMF country reports, and statements by government officials. 

The following is a preview of key findings that we will explore in greater depth in our upcoming report on the use of SDRs since August 2021:

  • 80 developing countries have used SDRs since the August allocation. 

  • 32 countries have exchanged SDRs for hard currency, for $11.6 billion.

  • 55 countries have paid the IMF with SDRs, for $6.5 billion.

  • 39 countries have recorded the SDRs in government budgets or have used them for fiscal purposes, for $37.3 billion. 

  • These numbers are significantly higher than those of the 2009 SDR allocation, suggesting both a greater need for these resources and a higher level of awareness among policymakers on how they can be used. 

  • The large majority of these transactions took place during the first three months since the SDR allocation, showing an urgent need for those resources.

  • The SDR allocation was initially proposed by IMF leadership in March 2020, but it took 17 months to become a reality. Two-thirds of the SDRs remain in the hands of high-income countries. Some rich countries have committed to lending a part of their excess SDRs to developing countries via special trusts. It has been reported that a new trust — called the Resilience and Sustainability Trust — will be run by the IMF (not development banks) and will include traditional IMF conditionality. Furthermore, it would only be ready by year-end.

  • In November, the chairs of the Progressive Caucus, the Black Caucus, the Hispanic Caucus, and the Asian Pacific American Caucus of the US Congress urged US Treasury Secretary Janet Yellen to back the issuance of $2 trillion more in SDRs. Legislation to this effect has already passed the House of Representatives and an accompanying bill was already proposed in the Senate. 

On August 23, 2021, the International Monetary Fund (IMF) allocated $650 billion worth of Special Drawing Rights (SDRs) to its members to add liquidity to the global economy during the unprecedented health and economic crises caused by COVID-19. 

SDRs, which are an international reserve asset, can be exchanged for hard currency, used to pay the IMF, or donated among member countries. The injection of these assets by the IMF can be used by governments to stabilize their currencies and shore up their reserves, or for a number of social or health policies — the latter being an especially important use for SDRs during the pandemic, as IMF Managing Director Kristalina Georgieva has said

Around a third of the SDRs were allocated to developing countries (excluding China, whose currency is included in the basket of currencies that determines the value of SDRs). 

CEPR has been publishing monthly reports on the use of SDRs based on accounting calculations derived from IMF SDR data, IMF country reports, and statements by government officials. 

The following is a preview of key findings that we will explore in greater depth in our upcoming report on the use of SDRs since August 2021:

  • 80 developing countries have used SDRs since the August allocation. 

  • 32 countries have exchanged SDRs for hard currency, for $11.6 billion.

  • 55 countries have paid the IMF with SDRs, for $6.5 billion.

  • 39 countries have recorded the SDRs in government budgets or have used them for fiscal purposes, for $37.3 billion. 

  • These numbers are significantly higher than those of the 2009 SDR allocation, suggesting both a greater need for these resources and a higher level of awareness among policymakers on how they can be used. 

  • The large majority of these transactions took place during the first three months since the SDR allocation, showing an urgent need for those resources.

  • The SDR allocation was initially proposed by IMF leadership in March 2020, but it took 17 months to become a reality. Two-thirds of the SDRs remain in the hands of high-income countries. Some rich countries have committed to lending a part of their excess SDRs to developing countries via special trusts. It has been reported that a new trust — called the Resilience and Sustainability Trust — will be run by the IMF (not development banks) and will include traditional IMF conditionality. Furthermore, it would only be ready by year-end.

  • In November, the chairs of the Progressive Caucus, the Black Caucus, the Hispanic Caucus, and the Asian Pacific American Caucus of the US Congress urged US Treasury Secretary Janet Yellen to back the issuance of $2 trillion more in SDRs. Legislation to this effect has already passed the House of Representatives and an accompanying bill was already proposed in the Senate. 

On August 23, 2021, the International Monetary Fund (IMF) allocated $650 billion worth of Special Drawing Rights (SDRs) to its members to add liquidity to the global economy during the unprecedented health and economic crises caused by COVID-19. SDRs, which are an international reserve asset, can be exchanged for hard currency or donated among member countries, meaning the injection by the IMF can be used by governments to stabilize their currencies and shore up their reserves, or for a number of social or health policies — the latter being an especially important use for SDRs during the pandemic, as IMF Managing Director Kristalina Georgieva has said

As a reminder, not all uses of SDRs involve operations at the SDR Department that modify member countries’ SDR holdings; some are domestic operations leveraged on SDR holdings. And simply having SDRs increase central bank reserves also improves a country’s financial position.


Shortly after the new allocation of SDRs in August 2021, we reported how countries were using them after the first week; later, we reported on countries’ use of SDRs during the month of September. The report for October includes data that compares the first three months of this SDR allocation with the 2009 allocation. 

The $650 billion allocation of SDRs continues to be an example of international cooperation leading to a concrete success. Several recent initiatives have sought to build on this success. In November, the chairs of the Congressional Progressive Caucus, the Black Caucus, the Hispanic Caucus, and the Asian Pacific American Caucus urged US Treasury Secretary Janet Yellen to back the issuance of $2 trillion more SDRs in a new allocation. Jubilee USA Network held a high-level panel with Africa Union Ambassador Hilda Suka-Mafudze, President of Bread for the World Reverend Eugene Cho, and Sam Brownback, former US senator, that discussed, in part, how a new allocation of SDRs can meet the continuing challenges of the pandemic.

Barbados Prime Minister Mia Mottley called for “$500 billion in SDRs annually for 20 years” — in total, 10 trillion dollars — to help vulnerable countries address the impacts of climate change. 

Lastly, there are also efforts to rechannel SDRs to poorer countries from countries that do not need them. China pledged to rechannel $10 billion worth of SDRs to African countries, or about 25 percent of its recent allocation. Other commitments to rechannel SDRs include those from Canada, Italy, Spain, the United Kingdom (20 percent), Japan (10 percent), the Republic of Korea (5 percent), Belgium (4 percent), and the Netherlands (3 percent). The United States has not yet pledged a specific amount.

Key takeaways from November data:

  • Paraguay, Maldives, and Moldova exchanged all, or almost all, of their SDRs for hard currency.
  • Argentina made a significant payment to the IMF with the recently allocated SDRs.
  • The IMF General Resources Account increased its SDR position by over $1.37 billion, with around half of this increase attributable to known payments to the IMF.
  • France had a significant decline of $344 million worth of SDRs.
  • The United States led the world with a purchase of $274 million worth of SDRs.

IMF Data: SDR accounts with large decreases

While reductions in countries’ SDR holdings usually imply an exchange of SDRs for hard currency, decreases in SDR holdings may also result from a payment in SDRs to the IMF for a loan or a transaction (such as a deposit) with a prescribed holder of SDRs. Countries may also lend SDRs to each other. Countries that exchange SDRs for hard currencies usually cite liquidity problems, dwindling foreign exchange reserves, and a need for more imports, as well as a desire to implement measures to address the pandemic.

There was a net total of $2.049 billion worth of SDRs exchanged in November.

Paraguay

$270 million decrease (100 percent reduction of its recent allocation)

On August 25, Paraguay’s parliament approved a law that transferred the SDRs from the central bank to the government budget for COVID-19 relief investments. In November, the government requested the SDR conversion into US dollars to use for fiscal spending.

Moldova 

$225 million decline (100 percent reduction of its recent allocation)

Moldova’s parliament approved a law that authorizes transfer of the SDRs from the central bank to the government budget. According to press reports, “Moldova will be able to use the 165.3 million Special Drawing Rights (SDRs), the equivalent of about 236 million dollars, agreed with the International Monetary Fund. The decision was approved by the Parliament on Thursday, October 14, in order to finance the budget deficit.”

Maldives

$28 million decline (97 percent reduction of its recent allocation)

There is no publicly available information on how Maldives used its SDRs. However, during October, the IMF issued its staff report on the Maldives economy, warning there are downside risks due to COVID-19 effects. It appears that the SDR cash equivalents were incorporated as grants into the revised 2021 budget. 

Argentina 

$385 million decline (9.0 percent reduction of its recent allocation)

Argentina paid part of its obligations to the IMF in November. The Argentine government used the SDRs for a complex set of operations that helped alleviate its external position marked by its IMF debt. The Argentine minister of finance has announced Argentina will pay its December obligations with the SDRs recently allocated. 

Other notable accounts:

The following countries reduced their SDR holdings because of payments to the International Monetary Fund. Some countries only paid interest charges, not principal, with SDRs.

  • Bangladesh. $38.8 million decline (2.7 percent reduction of its recent allocation)
  • Egypt. $141 million decline (5.2 percent reduction)
  • Iraq. $104 million decline (4.7 percent reduction)
  • Ukraine. $62 million decline (2.3 percent reduction)
  • Ecuador. $39 million decline (4.2 percent reduction)
  • Pakistan. $33 million decline (1.2 percent reduction)
  • Côte d’Ivoire. $24 million decline (3.8 percent reduction)
  • Angola. $19 million decline (1.9 percent reduction)
  • Tunisia. $13 million decline (1.8 percent reduction)
  • Albania. $9 million decline (4.8 percent reduction)
  • Dominica. $0.863 million decline (5.6 percent reduction)
  • Samoa. $0.813 million decline (3.7 percent reduction)

The following accounts reduced their SDR holdings.

  • France. $344 million decline (1.3 percent reduction of its recent allocation)
  • Mexico. $138 million decline (1.2 percent reduction)
  • Bank for International Settlements. $104 million decline

IMF Data: SDR accounts with large increases

These countries likely exchanged or issued hard currencies for SDRs. 

  • United States. $275 million increase 
  • The Netherlands. $225 million increase
  • Israel. $83 million increase

Ukraine received a substantial disbursement for $700 million, but it did not increase its SDR holdings. Tanzania restructured its debt with the IMF: it migrated from the General Resources Account to the Poverty Relief and Growth Trust. 

IMF General Resources Account

$1370 million increase in its SDR holdings in November

The IMF’s SDR holdings had a significant increase, $647 million of which were attributable to countries’ payments of past IMF debts. It is important to remember that no SDRs are allocated to the IMF; its holdings increase primarily on the basis of loan repayments. 


Countries to Watch

Apart from the IMF data, reporting on — or statements from — countries may give information on the use, or future use, of SDRs. It may also highlight the domestic use of SDRs, which would not appear as transactions in the IMF data. These are countries to watch in future months.

Several countries did not exchange their SDRs, but did use them for domestic fiscal purposes.

Here are countries to watch in future months.

  • Argentina will make payments to the IMF in December. There are reports that as part of a new agreement with the IMF, the IMF will disburse an amount equivalent to that paid back to the IMF throughout 2021, so as to have a net-zero SDR effect.
  • Mexico announced a capital injection to Pemex, its state oil company, linked to previous announcements on foreign exchange acquired from its central bank as a result of the SDR allocation. This capital will be used for foreign debt relief, through bond repurchases (presumably below par), and restructurings.
  • Sudan was blocked by the IMF from accessing approximately $150 million of its SDRs after the recent change in government. The main impact of the freeze “would be on development projects covering areas including water supply, electricity, agriculture, health and transport. An internationally funded basic income programme to lessen the impact of subsidy reform has also been frozen.”
  • Democratic Republic of Congo will use half of its SDR allocation to strengthen central bank reserves and the other half to improve the quality of public investments. The DR Congo will enter a new agreement with the IMF.
  • Zimbabwe. A post-2022 National Budget analysis states that out of $958 million, “Treasury has withdrawn US$311 million from the facility, with most of the funds (US$144 million) going to the rehabilitation of the Harare-Beitbridge Highway and the remainder being allocated to Covid-19 vaccination programmes (US$77 million) and agriculture social protection (US$80 million). Of the remaining amount, US$280 million has been set aside for foreign exchange reserves.”

On August 23, 2021, the International Monetary Fund (IMF) allocated $650 billion worth of Special Drawing Rights (SDRs) to its members to add liquidity to the global economy during the unprecedented health and economic crises caused by COVID-19. SDRs, which are an international reserve asset, can be exchanged for hard currency or donated among member countries, meaning the injection by the IMF can be used by governments to stabilize their currencies and shore up their reserves, or for a number of social or health policies — the latter being an especially important use for SDRs during the pandemic, as IMF Managing Director Kristalina Georgieva has said

As a reminder, not all uses of SDRs involve operations at the SDR Department that modify member countries’ SDR holdings; some are domestic operations leveraged on SDR holdings. And simply having SDRs increase central bank reserves also improves a country’s financial position.


Shortly after the new allocation of SDRs in August 2021, we reported how countries were using them after the first week; later, we reported on countries’ use of SDRs during the month of September. The report for October includes data that compares the first three months of this SDR allocation with the 2009 allocation. 

The $650 billion allocation of SDRs continues to be an example of international cooperation leading to a concrete success. Several recent initiatives have sought to build on this success. In November, the chairs of the Congressional Progressive Caucus, the Black Caucus, the Hispanic Caucus, and the Asian Pacific American Caucus urged US Treasury Secretary Janet Yellen to back the issuance of $2 trillion more SDRs in a new allocation. Jubilee USA Network held a high-level panel with Africa Union Ambassador Hilda Suka-Mafudze, President of Bread for the World Reverend Eugene Cho, and Sam Brownback, former US senator, that discussed, in part, how a new allocation of SDRs can meet the continuing challenges of the pandemic.

Barbados Prime Minister Mia Mottley called for “$500 billion in SDRs annually for 20 years” — in total, 10 trillion dollars — to help vulnerable countries address the impacts of climate change. 

Lastly, there are also efforts to rechannel SDRs to poorer countries from countries that do not need them. China pledged to rechannel $10 billion worth of SDRs to African countries, or about 25 percent of its recent allocation. Other commitments to rechannel SDRs include those from Canada, Italy, Spain, the United Kingdom (20 percent), Japan (10 percent), the Republic of Korea (5 percent), Belgium (4 percent), and the Netherlands (3 percent). The United States has not yet pledged a specific amount.

Key takeaways from November data:

  • Paraguay, Maldives, and Moldova exchanged all, or almost all, of their SDRs for hard currency.
  • Argentina made a significant payment to the IMF with the recently allocated SDRs.
  • The IMF General Resources Account increased its SDR position by over $1.37 billion, with around half of this increase attributable to known payments to the IMF.
  • France had a significant decline of $344 million worth of SDRs.
  • The United States led the world with a purchase of $274 million worth of SDRs.

IMF Data: SDR accounts with large decreases

While reductions in countries’ SDR holdings usually imply an exchange of SDRs for hard currency, decreases in SDR holdings may also result from a payment in SDRs to the IMF for a loan or a transaction (such as a deposit) with a prescribed holder of SDRs. Countries may also lend SDRs to each other. Countries that exchange SDRs for hard currencies usually cite liquidity problems, dwindling foreign exchange reserves, and a need for more imports, as well as a desire to implement measures to address the pandemic.

There was a net total of $2.049 billion worth of SDRs exchanged in November.

Paraguay

$270 million decrease (100 percent reduction of its recent allocation)

On August 25, Paraguay’s parliament approved a law that transferred the SDRs from the central bank to the government budget for COVID-19 relief investments. In November, the government requested the SDR conversion into US dollars to use for fiscal spending.

Moldova 

$225 million decline (100 percent reduction of its recent allocation)

Moldova’s parliament approved a law that authorizes transfer of the SDRs from the central bank to the government budget. According to press reports, “Moldova will be able to use the 165.3 million Special Drawing Rights (SDRs), the equivalent of about 236 million dollars, agreed with the International Monetary Fund. The decision was approved by the Parliament on Thursday, October 14, in order to finance the budget deficit.”

Maldives

$28 million decline (97 percent reduction of its recent allocation)

There is no publicly available information on how Maldives used its SDRs. However, during October, the IMF issued its staff report on the Maldives economy, warning there are downside risks due to COVID-19 effects. It appears that the SDR cash equivalents were incorporated as grants into the revised 2021 budget. 

Argentina 

$385 million decline (9.0 percent reduction of its recent allocation)

Argentina paid part of its obligations to the IMF in November. The Argentine government used the SDRs for a complex set of operations that helped alleviate its external position marked by its IMF debt. The Argentine minister of finance has announced Argentina will pay its December obligations with the SDRs recently allocated. 

Other notable accounts:

The following countries reduced their SDR holdings because of payments to the International Monetary Fund. Some countries only paid interest charges, not principal, with SDRs.

  • Bangladesh. $38.8 million decline (2.7 percent reduction of its recent allocation)
  • Egypt. $141 million decline (5.2 percent reduction)
  • Iraq. $104 million decline (4.7 percent reduction)
  • Ukraine. $62 million decline (2.3 percent reduction)
  • Ecuador. $39 million decline (4.2 percent reduction)
  • Pakistan. $33 million decline (1.2 percent reduction)
  • Côte d’Ivoire. $24 million decline (3.8 percent reduction)
  • Angola. $19 million decline (1.9 percent reduction)
  • Tunisia. $13 million decline (1.8 percent reduction)
  • Albania. $9 million decline (4.8 percent reduction)
  • Dominica. $0.863 million decline (5.6 percent reduction)
  • Samoa. $0.813 million decline (3.7 percent reduction)

The following accounts reduced their SDR holdings.

  • France. $344 million decline (1.3 percent reduction of its recent allocation)
  • Mexico. $138 million decline (1.2 percent reduction)
  • Bank for International Settlements. $104 million decline

IMF Data: SDR accounts with large increases

These countries likely exchanged or issued hard currencies for SDRs. 

  • United States. $275 million increase 
  • The Netherlands. $225 million increase
  • Israel. $83 million increase

Ukraine received a substantial disbursement for $700 million, but it did not increase its SDR holdings. Tanzania restructured its debt with the IMF: it migrated from the General Resources Account to the Poverty Relief and Growth Trust. 

IMF General Resources Account

$1370 million increase in its SDR holdings in November

The IMF’s SDR holdings had a significant increase, $647 million of which were attributable to countries’ payments of past IMF debts. It is important to remember that no SDRs are allocated to the IMF; its holdings increase primarily on the basis of loan repayments. 


Countries to Watch

Apart from the IMF data, reporting on — or statements from — countries may give information on the use, or future use, of SDRs. It may also highlight the domestic use of SDRs, which would not appear as transactions in the IMF data. These are countries to watch in future months.

Several countries did not exchange their SDRs, but did use them for domestic fiscal purposes.

Here are countries to watch in future months.

  • Argentina will make payments to the IMF in December. There are reports that as part of a new agreement with the IMF, the IMF will disburse an amount equivalent to that paid back to the IMF throughout 2021, so as to have a net-zero SDR effect.
  • Mexico announced a capital injection to Pemex, its state oil company, linked to previous announcements on foreign exchange acquired from its central bank as a result of the SDR allocation. This capital will be used for foreign debt relief, through bond repurchases (presumably below par), and restructurings.
  • Sudan was blocked by the IMF from accessing approximately $150 million of its SDRs after the recent change in government. The main impact of the freeze “would be on development projects covering areas including water supply, electricity, agriculture, health and transport. An internationally funded basic income programme to lessen the impact of subsidy reform has also been frozen.”
  • Democratic Republic of Congo will use half of its SDR allocation to strengthen central bank reserves and the other half to improve the quality of public investments. The DR Congo will enter a new agreement with the IMF.
  • Zimbabwe. A post-2022 National Budget analysis states that out of $958 million, “Treasury has withdrawn US$311 million from the facility, with most of the funds (US$144 million) going to the rehabilitation of the Harare-Beitbridge Highway and the remainder being allocated to Covid-19 vaccination programmes (US$77 million) and agriculture social protection (US$80 million). Of the remaining amount, US$280 million has been set aside for foreign exchange reserves.”

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